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The role of multinational production in a risky environment

Natalia Ramondo and Veronica Rappoport

Journal of International Economics, 2010, vol. 81, issue 2, 240-252

Abstract: This paper explores the aggregate consequences of Foreign Direct Investment (FDI) on the opportunities for risk diversification available to consumers. The crucial difference between FDI and other international financial flows is that the former involves technology flows across countries. We present a model where firm-embedded productivity can be transferred costly across countries through the activity of multinational firms. We find that risk patterns affect multinationals' location decisions and, in turn, these decisions change the scope for international risk diversification even in a world with complete financial markets.

Keywords: Foreign; Direct; Investment; Multinational; firms; International; risk; sharing (search for similar items in EconPapers)
Date: 2010
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Working Paper: The Role of Multinational Production in a Risky Environment (2009) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:81:y:2010:i:2:p:240-252

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