Trade Integration, Welfare, and Horizontal Multinationals: A three-country model

Fabio Cerina, Tadashi Morita () and Kazuhiro Yamamoto

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: In this paper, we construct a three-country model with national and multinational (multi-plant) firms, in which oligopolistic firms in each country export their goods to other countries. We investigate the effects of trade liberalization between two countries on the third country. When the fixed costs of foreign direct investment (FDI) are sufficiently large, the firm does not conduct FDI, and trade liberalization always reduces the welfare level of the third country. When the fixed costs of FDI are small, trade liberalization may improve the welfare level of the third country. In addition, we observe cases under which trade liberalization between two of the countries improves the welfare of all three countries. In those cases, the two countries have incentives to join a free trade agreement (FTA), while the third country has no incentive to do so.

Pages: 22 pages
Date: 2015-09
New Economics Papers: this item is included in nep-bec and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.rieti.go.jp/jp/publications/dp/15e109.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:15109

Access Statistics for this paper

More papers in Discussion papers from Research Institute of Economy, Trade and Industry (RIETI) Contact information at EDIRC.
Bibliographic data for series maintained by TANIMOTO, Toko ().