The theory of endowment, intra-industry and multi-national trade

James Markusen and Anthony Venables

Chapter 4 in Broadening Trade Theory:Incorporating Market Realities into Traditional Models, 2021, pp 69-94 from World Scientific Publishing Co. Pte. Ltd.

Abstract: We develop a monopolistic-competition model of international trade which includes positive trade costs and endogenous multinational firms. We demonstrate how the presence of trade costs changes the pattern of trade, creates incentives for factor mobility which may lead to agglomeration of activity in a single country, and may lead to multinational firms. The mix of national and multinational firms that operate in equilibrium depends on technology and on the division of the world endowment between countries. Multinationals are more likely to exist the more similar are countries in both relative and absolute endowments, a result consistent with empirical evidence. The presence of multinationals creates trade in headquarters’ services, alters the incentives for factor mobility, and reduces the tendencies towards agglomeration.

Keywords: Multinational Firms; Horizontal Multinationals; Vertical Multinationals; Internalization; Vertical Integration; Outsourcing; Foreign Affiliates; Per-Capita Income; Non-homothetic Preferences; Income Elasticity of Demand; Missing Trade Puzzle; Skill Premium Puzzle; Pro-competitive Gains From Trade; Complements; Externalities (search for similar items in EconPapers)
JEL-codes: F00 F02 F13 F41 F43 (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.worldscientific.com/doi/pdf/10.1142/9789811222962_0004 (application/pdf)
https://www.worldscientific.com/doi/abs/10.1142/9789811222962_0004 (text/html)
Ebook Access is available upon purchase.

Related works:
Journal Article: The theory of endowment, intra-industry and multi-national trade (2000)
Working Paper: The Theory of Endowment, Intra-Industry and Multinational Trade (1996)
Working Paper: The Theory of Endowment, Intra-Industry, and Multinational Trade (1996)
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:wsi:wschap:9789811222962_0004

Ordering information: This item can be ordered from

Access Statistics for this chapter

More chapters in World Scientific Book Chapters from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().