Multinational firms and the new trade theory

James R. Markusen, Anthony J. Venables

Research output: Chapter in Book/Report/Conference proceedingChapter (Book)Otherpeer-review


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
Title of host publicationBroadening Trade Theory
Subtitle of host publicationIncorporating Market Realities into Traditional Models
EditorsJames R. Markusen
Place of PublicationSingapore Singapore
PublisherWorld Scientific Publishing
Number of pages21
ISBN (Electronic)9789811222962
ISBN (Print)9789811222955, 9789811222979
Publication statusPublished - 2021
Externally publishedYes

Publication series

NameWorld Scientific Studies in International Economics
ISSN (Print)1793-3641


  • Endogeneous location
  • Multinationals
  • New trade theory

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