The Vertical Multinational Enterprise and International Trade
By explicitly modeling distortion in the intermediate goods sector, I develop a model of an endogenous vertical multinational enterprise. Firms invest abroad to lower cost of multi-stage production. The implications for international trade and investment differ markedly from the conventional wisdom of multinationals. Particularly, intra-firm trade in intermediates implies vertical investment complements rather than substitutes for trade. The decision to become a multinational depends on the level of foreign factor prices, nature of competition with foreign suppliers, transport, tariff, and subsidiary plant costs. Marginal change in tariff may result in welfare jumps as firm configuration shifts.
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- Helpman, Elhanan, 1984.
"A Simple Theory of International Trade with Multinational Corporations,"
Journal of Political Economy,
University of Chicago Press, vol. 92(3), pages 451-471, June.
- Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Scholarly Articles 3445092, Harvard University Department of Economics.
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- Markusen, James R., 1984. "Multinationals, multi-plant economies, and the gains from trade," Journal of International Economics, Elsevier, vol. 16(3-4), pages 205-226, May.
- Konan, Denise Eby, 1996. "Transfer Pricing and Strategic Taxation of Globally Joint Inputs," Review of International Economics, Wiley Blackwell, vol. 4(2), pages 202-210, June.
- Spencer, Barbara J. & Jones, Ronald W., 1992.
"Trade and protection in vertically related markets,"
Journal of International Economics,
Elsevier, vol. 32(1-2), pages 31-55, February.
- Barbara J. Spencer & Ronald W. Jones, 1989. "Trade and Protection in Vertically Related Markets," NBER Working Papers 3023, National Bureau of Economic Research, Inc.
- Jones, R.W. & Spencer, B.J., 1989. "Trade And Protection In Vertically Related Markets," RCER Working Papers 195, University of Rochester - Center for Economic Research (RCER).
- Konan, Denise Eby, 1997. "Strategic taxation of the multinational enterprise: A new argument for double taxation," Journal of Public Economics, Elsevier, vol. 63(2), pages 301-309, January.
- Ethier, Wilfred J. & Horn, Henrik, 1990. "Managerial control of international firms and patterns of direct investment," Journal of International Economics, Elsevier, vol. 28(1-2), pages 25-45, February.
- James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
- 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.
- Horstmann, Ignatius J & Markusen, James R, 1989. "Firm-Specific Assets and the Gains from Direct Foreign Investment," Economica, London School of Economics and Political Science, vol. 56(221), pages 41-48, February.
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