 Regional Economic Integration and Geographic Concentration of Multinational FirmsWorking Papers from The George Washington University, Institute for International Economic Policy Abstract: A number of theoretical studies have predicted that preferential trade agreements (PTAs) raise outside multinationals incentive to invest in the participating countries, especially in those that are integrated with larger markets and have lower production costs. The hypothesis has however not been tested empirically. This paper addresses the issue by estimating the impact of PTAs on countries ability to attract multinationals. The evidence is broadly consistent with expectations. The formation of PTAs leads to an increase in FDI by outside multinationals, but the eect varies sharply with the size of integrated markets and countries comparative advantage. Countries integrated with larger markets experience a greater increase in total and export-platform FDI. Those with a higher labor endowment also attract more FDI especially in labor-intensive industries, but at the expense of their labor-scarce PTA partners. Keywords: regional economic integration; multinational rms; geographic concentration; market potential; comparative advantage (search for similar items in EconPapers) Published in the European Economic Review Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:gwi:wpaper:2009-07 Access Statistics for this paper More papers in Working Papers from The George Washington University, Institute for International Economic Policy Contact information at EDIRC. |
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