IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/5529.html
   My bibliography  Save this paper

The Theory of Endowment, Intra-Industry, and Multinational Trade

Author

Listed:
  • James R. Markusen
  • Anthony J. Venables

Abstract

We consider a trade model combining a 2x2x2 Heckscher-Ohlin structure, monopolistic competition, transport costs, and multinational corporations. We demonstrate how the mix of national and multinational firms that operate in equilibrium depends on technology and on the division of the world endowment between countries. Multinationals are more likely to exist the more similar are countries in both relative and absolute endowments. Where multinationals exist they reduce the volume of trade and raise world welfare (although not necessarily that of both countries). They also reduce the agglomeration forces that arise when international factor mobility is allowed.

Suggested Citation

  • James R. Markusen & Anthony J. Venables, 1996. "The Theory of Endowment, Intra-Industry, and Multinational Trade," NBER Working Papers 5529, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:5529
    Note: ITI
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w5529.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Brander, James & Krugman, Paul, 1983. "A 'reciprocal dumping' model of international trade," Journal of International Economics, Elsevier, vol. 15(3-4), pages 313-321, November.
    2. Davis, Donald R, 1998. "The Home Market, Trade, and Industrial Structure," American Economic Review, American Economic Association, vol. 88(5), pages 1264-1276, December.
    3. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-959, December.
    4. Markusen, James R., 1983. "Factor movements and commodity trade as complements," Journal of International Economics, Elsevier, vol. 14(3-4), pages 341-356, May.
    5. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    6. Markusen, James R. & Venables, Anthony J., 1998. "Multinational firms and the new trade theory," Journal of International Economics, Elsevier, vol. 46(2), pages 183-203, December.
    7. Markusen, James R., 1981. "Trade and the gains from trade with imperfect competition," Journal of International Economics, Elsevier, vol. 11(4), pages 531-551, November.
    8. Norman, Victor D & Venables, Anthony J, 1995. "International Trade, Factor Mobility and Trade Costs," Economic Journal, Royal Economic Society, vol. 105(433), pages 1488-1504, November.
    9. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    10. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
    11. James R. Markusen & James R. Melvin, 1981. "Trade, Factor Prices, and the Gains from Trade with Increasing Returns to Scale," Canadian Journal of Economics, Canadian Economics Association, vol. 14(3), pages 450-469, August.
    12. James R. Markusen & Anthony J. Venables, 2021. "Multinational firms and the new trade theory," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 3, pages 47-67, World Scientific Publishing Co. Pte. Ltd..
    13. Venables, Anthony J., 1985. "Trade and trade policy with imperfect competition: The case of identical products and free entry," Journal of International Economics, Elsevier, vol. 19(1-2), pages 1-19, August.
    14. 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.
    15. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
    16. J. P. Neary (ed.), 1995. "International Trade," Books, Edward Elgar Publishing, volume 0, number 575.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. J. Peter Neary, 2000. "Monopolistic competition and international trade theory," Working Papers 200025, School of Economics, University College Dublin.
    2. Krugman, Paul R., 1989. "Industrial organization and international trade," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 20, pages 1179-1223, Elsevier.
    3. Koska, Onur A. & Stähler, Frank, 2014. "Trade and imperfect competition in general equilibrium," Journal of International Economics, Elsevier, vol. 94(1), pages 157-168.
    4. Amiti, Mary, 1998. "Inter-industry trade in manufactures: Does country size matter?," Journal of International Economics, Elsevier, vol. 44(2), pages 231-255, April.
    5. Andrzej Cieślik, 2013. "Horizontally-integrated MNE and plant heterogeneity," Bank i Kredyt, Narodowy Bank Polski, vol. 44(6), pages 605-622.
    6. Joseph Francois & Douglas R. Nelson, 2000. "Victims of Progress: Economic Integration, Specialization, and Wages for Unskilled Labor," Tinbergen Institute Discussion Papers 00-065/2, Tinbergen Institute.
    7. J.Peter Neary, 2001. "Of Hype and Hyperbolas: Introducing the New Economic Geography," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 536-561, June.
    8. Karolina Ekholm & Katariina Hakkala, 2007. "Location of R&D and High-Tech Production by Vertically Integrated Multinationals," Economic Journal, Royal Economic Society, vol. 117(518), pages 512-543, March.
    9. Antrà s, Pol & Yeaple, Stephen R., 2014. "Multinational Firms and the Structure of International Trade," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 55-130, Elsevier.
    10. Lionel Fontagné & Michaël Freudenberg & Deniz Ünal, 1995. "Régionalisation et échanges de biens intermédiaires," Working Papers 1995-11, CEPII research center.
    11. Rauscher, Michael, 2001. "International trade, foreign investment, and the environment," Thuenen-Series of Applied Economic Theory 29, University of Rostock, Institute of Economics.
    12. Salvador Barrios & Holger Görg & Eric Strobl, 2003. "Multinational Enterprises and New Trade Theory: Evidence for the Convergence Hypothesis," Open Economies Review, Springer, vol. 14(4), pages 397-418, October.
    13. TOMOHARA Akinori, 2017. "Do Migrant and Business Networks Promote International Royalty Receipts?," Discussion papers 17006, Research Institute of Economy, Trade and Industry (RIETI).
    14. Robert C. Feenstra & James A. Markusen & Andrew K. Rose, 1998. "Undertstanding the Home Market Effect and the Gravity Equation: The Role of Differentiating Goods," NBER Working Papers 6804, National Bureau of Economic Research, Inc.
    15. Ignatius J. Horstmann & James R. Markusen, 1990. "Endogenous Market Structures in International Trade," NBER Working Papers 3283, National Bureau of Economic Research, Inc.
    16. Hartmut Egger & Josef Falkinger, 2016. "Limited Consumer Attention in International Trade," Review of International Economics, Wiley Blackwell, vol. 24(5), pages 1096-1128, November.
    17. Epifani, Paolo & Gancia, Gino, 2017. "Global imbalances revisited: The transfer problem and transport costs in monopolistic competition," Journal of International Economics, Elsevier, vol. 108(C), pages 99-116.
    18. Ai‐Ting Goh & Tomasz K. Michalski, 2012. "Quality Assurance and the Home Market Effect," Review of International Economics, Wiley Blackwell, vol. 20(2), pages 237-255, May.
    19. Nielsen, Bo Bernhard & Asmussen, Christian Geisler & Weatherall, Cecilie Dohlmann, 2017. "The location choice of foreign direct investments: Empirical evidence and methodological challenges," Journal of World Business, Elsevier, vol. 52(1), pages 62-82.
    20. Bajo-Rubio, Oscar & López-Pueyo, Carmen, 2002. "Foreign Direct Investment in a Process of Economic Integration: The Case of Spanish Manufacturing, 1986-1992," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 17, pages 85-103.

    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • F2 - International Economics - - International Factor Movements and International Business

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:5529. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.