Trade, multinational sales, and FDI in a three-factors model

Arbeitspapier

The overwhelming importance of multinational activities as well as the coexistence of exporters and multinationals within the developed countries demand for theoretical models which provide a convincing explanation of simultaneous two-way trade and horizontal multinational activities. We present a model with three factors of production to disentangle the twofold importance of headquarters for their affiliates into a know-how and a capital serving part (FDI). Multinationals trade-off the incentives for a high proximity to the market and a concentraion of production facilities. We simulate the model to derive predictions about the impact of trade costs, plant set-up costs, relative country size and factor endowments on the factor prices of labor, human and physical capital on the one hand and three main output variables, exports, multination sales and FDI, on the other. We find that the effects are not uniform for multinational sales and FDI. Hence, one shuld be careful with interpreting the simulation results of previous work for sales as simply holding for FDI as well.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 0013

Classification and Topics

• Classification: Wirtschaft ; Models of Trade with Imperfect Competition and Scale Economies; Fragmentation ; Trade Policy; International Trade Organizations
• Subject: multinationals ; new trade theory ; endogenous location ; Multinationales Unternehmen ; Direktinvestition ; Neue Außenhandelstheorie ; Wirtschaftsmodell ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Egger, Peter ; Pfaffermayr, Michael
• Event: Veröffentlichung
• (who): Johannes Kepler University of Linz, Department of Economics
• (where): Linz
• (when): 2000

Further information

• Handle: http://hdl.handle.net/10419/73310
• Last update: 10.03.2025, 11:44 AM CET