Foreign Direct Investment and the Single Market

J. Peter Neary

No 3419, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This Paper extends the theory of multinational corporations, identifying three distinct influences of internal trade liberalization by a group of countries on the level and pattern of inward foreign direct investment (FDI). First, the tariff-jumping motive encourages plant consolidation. Second, the export platform motive favours FDI with only a single union plant relative to exporting, and may induce a firm that has never exported to invest. Finally, reduced internal tariffs increase competition from domestic firms, which dilutes the other motives and may induce a ?Fortress Europe? outcome of multinationals leaving union markets even though external tariffs are unchanged.

Keywords: Foreign direct investment; market integration; Multinational corporations; Single market (search for similar items in EconPapers)
JEL-codes: F12 F15 F23 (search for similar items in EconPapers)
Date: 2002-06
New Economics Papers: this item is included in nep-eec and nep-ifn
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Citations: View citations in EconPapers (88)

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Journal Article: Foreign Direct Investment and the Single Market (2002)
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