Multinational Firms, Integration and Economic Growth

José Pedro Pontes ()

No 2001/11, Working Papers from Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.

Abstract: The importance and the impacts of horizontal multinational corporations in the context of integration and economic growth processes are examined. A noncooperative game with two firms that choose to have either one or two plants located in two asymmetric countries is used. The firms compete purely through location. Economic integration has an ambiguous impact upon foreign direct investment. On one hand, it decreases trade costs and easies the access to foreign markets through exports. On the other hand, through economic growth, it increases the size of the markets with relation to plant fixed costs and makes multinationals economically feasible. The latter effect, entails a decentralisation of production towards the smaller country.

Keywords: Multinationals; Location; Noncooperative games. (search for similar items in EconPapers)
JEL-codes: F23 R10 C72 (search for similar items in EconPapers)
Date: Written 2001

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Persistent link: http://EconPapers.repec.org/RePEc:ise:isegwp:wp112001

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