Multinational Firms and Economic Integration: The Role of Global Uncertainty

Jaewon Jung ()
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Jaewon Jung: School of Business and Economics, Dankook University, Yongin 16890, Republic of Korea

Sustainability, 2023, vol. 15, issue 3, 1-18

Abstract: This paper develops a three-country, two-sector, two-factor general-equilibrium trade model in which multinational firms’ FDI decisions are influenced by global uncertainty level. We investigate the effects of economic integration under uncertainty, and highlight an important new type of FDI which is certainty-seeking. A numerical general-equilibrium model has been explored to study in depth the endogenous regime changes with six different firm types. Among others, we show that multinational firms are highly influenced by global uncertainty level, so that even the same economic integration process leads to significantly different global market structure.

Keywords: multinational firms; foreign direct investment (FDI); global uncertainty; economic integration; global market structure; certainty-seeking FDI; trade-cost-uncertainty box (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
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