Economic Geography and Multinational Enterprise

Marzia Raybaudi

Review of International Economics, 2000, vol. 8, issue 1, 1-19

Abstract: This paper proposes an economic geography model with two countries, two sectors, and two factors of production, allowing for single‐plant and double‐plant firms. Location patterns are studied by assessing the existence of the various equilibrium configurations. Income and wages are allowed to change following defection, and it is assumed that labor migrates towards the country with highest real wages. It is shown that the tendency towards configurations characterized by an “industrial core” and an “agricultural periphery” predicted by models which do not allow for the existence of FDI, is reduced by the presence of multinationals.

Date: 2000
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