Welfare, home market effects, and horizontal foreign direct investment

Kristian Behrens () and Pierre Picard

No 2005065, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

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 fully characterize the spatial equilibria analytically. Comparing the equilibrium and the first-best, we show that both organizational and spatial inefficiencies may arise. In particular, when fixed costs are low enough the market outcome may well lead to overinvestment and, therefore, to too many multinationals operating from a social point of view. Furthermore, once multinationals are taken into account, the market outcome may well lead too little agglomeration.

Keywords: international trade; imperfect competition; horizontal foreign direct investment; economic geography (search for similar items in EconPapers)
JEL-codes: F12 F23 R12 (search for similar items in EconPapers)
Date: 2005-10
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Welfare, home market effects, and horizontal foreign direct investment (2007)
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)
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