Appropriate Technology in a Model of Multinational Duopoly

Michael J. Ferrantino

Canadian Journal of Economics, 1991, vol. 24, issue 3, 660-78

Abstract: This paper seeks to motivate the observed tendency of multinationals with home bases in LDCs to adopt labor-intensive technology relative to their counterparts in industrial countries. Two multinationals play a spatial duopoly game in which the location, mode of market service (exports or on-site production), and technology choice of the third-world multinational are simultaneously determined. The model is calibrated using observed data on transport costs, factor shares, research intensity, and international income distribution. LDC firms are shown to prefer labor-intensive technological adaptation even when the option of producing on-site in high-income markets is available.

Date: 1991
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