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Firm Heterogeneity and the Localization of Economic Activities

Listed author(s):
  • Pamela Bombarda

    ()

    (THEMA, Universite de Cergy-Pontoise)

This paper examines how market access strategies, export and FDI, respond to changes in level of integration. Empirical evidence shows that both firm exports and multinational activity are affected by trade liberalization episode. To account for the strong positive correlation between export and FDI, we develop a general equilibrium model that features firm heterogeneity, trade and FDI with final and intermediate products. Different spatial networks are considered to quantify the effect of a preferential trade agreement (PTA) on supply mode decisions, for both partner and excluded countries. The model sheds new light on the mechanisms through which geography reshapes the concentration of economic activities inside and outside the PTA area.

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File URL: http://thema.u-cergy.fr/IMG/documents/2013-25.pdf
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Paper provided by THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise in its series THEMA Working Papers with number 2013-25.

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Date of creation: 2013
Handle: RePEc:ema:worpap:2013-25
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  1. Baltagi, Badi H. & Egger, Peter & Pfaffermayr, Michael, 2008. "Estimating regional trade agreement effects on FDI in an interdependent world," Journal of Econometrics, Elsevier, vol. 145(1-2), pages 194-208, July.
  2. Chen, Maggie X., 2009. "Regional economic integration and geographic concentration of multinational firms," European Economic Review, Elsevier, vol. 53(3), pages 355-375, April.
  3. Horstmann, Ignatius J. & Markusen, James R., 1992. "Endogenous market structures in international trade (natura facit saltum)," Journal of International Economics, Elsevier, vol. 32(1-2), pages 109-129, February.
  4. Behrens, Kristian & Lamorgese, Andrea R. & Ottaviano, Gianmarco I.P. & Tabuchi, Takatoshi, 2007. "Changes in transport and non-transport costs: Local vs global impacts in a spatial network," Regional Science and Urban Economics, Elsevier, vol. 37(6), pages 625-648, November.
  5. Chen, Maggie Xiaoyang & Moore, Michael O., 2010. "Location decision of heterogeneous multinational firms," Journal of International Economics, Elsevier, vol. 80(2), pages 188-199, March.
  6. Richard Baldwin, 2005. "Heterogeneous Firms and Trade: Testable and Untestable Properties of the Melitz Model," NBER Working Papers 11471, National Bureau of Economic Research, Inc.
  7. Gordon H. Hanson & Raymond J. Mataloni, Jr. & Matthew J. Slaughter, 2001. "Expansion Strategies of U.S. Multinational Firms," NBER Working Papers 8433, National Bureau of Economic Research, Inc.
  8. Blonigen, Bruce A. & Davies, Ronald B. & Waddell, Glen R. & Naughton, Helen T., 2007. "FDI in space: Spatial autoregressive relationships in foreign direct investment," European Economic Review, Elsevier, vol. 51(5), pages 1303-1325, July.
  9. S. Lael Brainard, 1993. "A Simple Theory of Multinational Corporations and Trade with a Trade-Off Between Proximity and Concentration," NBER Working Papers 4269, National Bureau of Economic Research, Inc.
  10. Behrens, Kristian & Lamorgese, Andrea R. & Ottaviano, Gianmarco I.P. & Tabuchi, Takatoshi, 2009. "Beyond the home market effect: Market size and specialization in a multi-country world," Journal of International Economics, Elsevier, vol. 79(2), pages 259-265, November.
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