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Multinational Firms and the Structure of International Trade

Pol Antràs and Stephen Yeaple

Chapter Chapter 2 in Handbook of International Economics, 2014, vol. 4, pp 55-130 from Elsevier

Abstract: This chapter reviews the state of the international trade literature on multinational firms. This literature addresses three main questions. First, why do some firms operate in more than one country while others do not? Second, what determines in which countries production facilities are located? Finally, why do firms own foreign facilities rather than simply contract with local producers or distributors? We organize our exposition of the trade literature on multinational firms around the workhorse monopolistic competition model with constant-elasticity-of-substitution (CES) preferences. On the theoretical side, we review alternative ways to introduce multinational activity into this unifying framework, illustrating some key mechanisms emphasized in the literature. On the empirical side, we discuss the key studies and provide updated empirical results and further robustness tests using new sources of data.

Keywords: Multinationals; Foreign direct investment; Vertical FDI; Horizontal FDI; Complex FDI; Internalization; Offshoring; Outsourcing; Related party trade; Cross-border acquisitions; Greenfield FDI (search for similar items in EconPapers)
JEL-codes: F23 F12 F2 F1 F61 D21 D23 D22 D2 L2 (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1016/B978-0-444-54314-1.00002-1

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