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Asymmetric Effects of Trade and FDI: The Role of Country Size and Bridge Multinational Production

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  • Allub, Lian
  • Aragon, Nicolas

Abstract

Total gains from openness come through three channels: (i) trade, (ii) domestic multinational production (DMP), and (iii) bridge multinational production (BMP). We develop a quantitative theory to measure the effects of trade barriers and country size on the gains from openness through each of these channels. We show that these are sensitive to country size and larger in Europe than in South America. Country size is a crucial determinant of the contribution of each of these channels to the total gains from openness. DMP is more important in large countries, whereas the BMP channel is more important in small countries.

Suggested Citation

  • Allub, Lian & Aragon, Nicolas, 2022. "Asymmetric Effects of Trade and FDI: The Role of Country Size and Bridge Multinational Production," Research Department working papers 1986, CAF Development Bank Of Latinamerica.
    • Handle: RePEc:dbl:dblwop:1986
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    File URL: https://scioteca.caf.com/handle/123456789/1986
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    Keywords

    Comercio internacional; Finanzas;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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