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Trade, Multinational Production, and the Gains from Openness

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  • Natalia Ramondo
  • Andrés Rodríguez-Clare

Abstract

This paper quantifies the gains from openness arising from trade and multinational production (MP). We present a model that captures key dimensions of the interaction between these two flows: trade and MP are competing ways to serve a foreign market, MP relies on imports of intermediate goods from the home country, and foreign affiliates of multinationals can export part of their output. The calibrated model implies that the gains from trade can be twice as high as the gains calculated in trade-only models, while the gains from MP are slightly lower than the gains computed in MP-only models.

Suggested Citation

  • Natalia Ramondo & Andrés Rodríguez-Clare, 2013. "Trade, Multinational Production, and the Gains from Openness," Journal of Political Economy, University of Chicago Press, vol. 121(2), pages 273-322.
  • Handle: RePEc:ucp:jpolec:doi:10.1086/670136
    DOI: 10.1086/670136
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    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • F10 - International Economics - - Trade - - - General
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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