International trade theory and evidence markusen pdf

Despite the great importance of multinational firms in international economics, theoretical and empirical research on these firms has generally been conducted separately from that on international trade. In this book, James Markusen provides a com Supply and Production Possibilities. Preferences, Demand, and Welfare. General Equilibrium in Open and Closed Economies.

A model is constructed in which multinational firms may arise endogenously. Multinationals exist in equilibrium when transport and tariff costs are high, incomes are high, and firm-level scale economies are important relative to plant-level scale economies. Less obvious, multinationals are more important in total economic activity when countries are more similar in incomes, relative factor endowments, and technologies. The model may thus be useful in explaining several stylized facts, including a the growing importance of direct investment relative to trade among the developed countries over time and b the greater ratio of investment to trade among the developed countries relative to this ratio for 'north-south' or 'south-south' economic relationships. The model offers predictions about the volume of trade that contrast with those of the 'new trade theory', predicting that trade at first rises and then falls as countries converge in incomes, relative endowments, and technologies.

By James Markusen, James Melvin, Keith Maskus and William Kaempfer; Abstract: International trade: theory and evidence original version ( application/pdf).
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