Multinational firms and the new trade theory

James R. Markusen, Anthony J. Venables

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Abstract

A model is constructed in which multinational firms arise endogenously. Multinationals are more important in total activity when countries are similar in incomes (size) and in relative factor endowments, and when total world income is high. These predictions are consistent with empirical evidence, and our results help point to more formal tests. The standard oligopoly model of international trade is a special case of our model when multinationals are suppressed, and this allows us to provide an explicit comparison to the national-firm model with respect to the location of production, welfare, and the volume of trade.

Original languageEnglish
Pages (from-to)183-203
Number of pages21
JournalJournal of International Economics
Volume46
Issue number2
DOIs
Publication statusPublished - 1 Dec 1998
Externally publishedYes

Keywords

  • Endogeneous location
  • Multinationals
  • New trade theory
  • Multinational firms and the new trade theory

    Markusen, J. R. & Venables, A. J., 2021, Broadening Trade Theory: Incorporating Market Realities into Traditional Models. Markusen, J. R. (ed.). 1st ed. Singapore Singapore: World Scientific Publishing, p. 47-67 21 p. (World Scientific Studies in International Economics; vol. 78).

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    1 Citation (Scopus)

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