A Simple Theory of Multinational Corporations and Trade With a Trade-Off Between Proximity and Concentration PDF Download

Author: S. Lael Brainard
Publisher: Forgotten Books
ISBN: 9781330415535
Category : Business & Economics
Languages : en
Pages : 41

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Book Description
Excerpt from A Simple Theory of Multinational Corporations and Trade With a Trade-Off Between Proximity and Concentration This paper develops a two-sector, two-country model, where firms in a differentiated products sector choose between exporting and multinational expansion as alternative modes of foreign market penetration, based on a trade-off between proximity and concentration advantages. The differentiated sector is characterized by multi-stage production, with increasing returns at the firm level, due to some activity such as R&D that can be spread among any number of production facilities with undiminished value, scale economies at the plant level, and a variable transport cost that rises with distance. A pure multinational equilibrium, where two-way intraindustry trade in intangibles completely supplants two-way trade in differentiated products, is possible even in the absence of factor proportion differences. It is more likely the greater are transport costs relative to the fixed cost of production, and the greater are increasing returns at the firm level relative to the plant level. The model also examines how the pattern of trade and production varies with additional stages of production. I am grateful to Paul Krugman and Julio Rotemberg for helpful discussions, and to the National Science Foundation for support under grant SES-9111649. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.