Welfare, home market effects, and horizontal foreign direct investment

Kristian Behrens and Pierre Picard

Canadian Journal of Economics/Revue canadienne d'économique, 2007, vol. 40, issue 4, 1118-1148

Abstract: Abstract. We investigate the spatial distribution and organization of an imperfectly competitive industry when firms may choose to operate more than a single production unit. Focusing on a short‐run setting with a fixed mass of firms, we first fully characterize the spatial equilibria analytically. Comparing the equilibrium and the first‐best, we secondly show that both organizational and spatial inefficiencies may arise. In particular, when fixed costs are low, when transport costs are high, and when products are close substitutes, the market outcome may well have to too many multinationals operating from a social point of view (‘over‐investment’). As a by‐product, under‐agglomeration of exporters in the larger market may arise. Dans cet article, nous étudions la distribution spatiale et la structure des firmes appartenant à un industrie imparfaitement concurrentielle et ayant la possibilité de produire à partir d'un ou plusieurs sites de production. Nous présentons premièrement une caractérisation analytique complète des équilibres de marchéà court terme et, comparant ensuite ces derniers à la solution de premier rang, nous démontrons la présence d'inefficacités organisationnelles et spatiales. En particulier, lorsque les coûts fixes de production sont faibles, lorsque les coûts de transport sont élevés et lorsque les biens sont peu différenciés, l'équilibre de marché est susceptible de générer un nombre trop important de multinationales (sur‐investissement) ainsi qu'un nombre trop faible d'exportateurs dans le plus grand marché (sous‐agglomération).

Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://doi.org/10.1111/j.1365-2966.2007.00445.x

Related works:
Journal Article: Welfare, home market effects, and horizontal foreign direct investment (2007)
Working Paper: Welfare, home market effects, and horizontal foreign direct investment (2007)
Working Paper: Welfare, home market effects, and horizontal foreign direct investment (2005)
Working Paper: Welfare, home market effects, and horizontal foreign direct investment (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:canjec:v:40:y:2007:i:4:p:1118-1148

Access Statistics for this article

More articles in Canadian Journal of Economics/Revue canadienne d'économique from John Wiley & Sons
Bibliographic data for series maintained by Wiley Content Delivery ().