Vertical Multinationals and Host-Country Characteristics

Kevin H. Zhang and James Markusen

No 6203, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The literature on multinationals and developing countries has examined the causality" running from direct investment to changes in country characteristics (wages skills, etc.) and also the opposite direction of causality, from existing country characteristics to" inward direct investment. This paper contributes to the second line of research the question of what country characteristics, particularly market size and labor-force" composition, attract inward investment. This approach is motivated by the empirical" observation that the poorest countries attract a far smaller share of world direct investment than" their share of income. Small markets receive less investment per capita than larger ones. We" develop a model that generates both stylized facts in equilibrium, suggesting the existence of a" development trap for small, skilled-labor-scarce countries.

JEL-codes: F12 F23 (search for similar items in EconPapers)
Date: 1997-09
Note: ITI
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Published as Journal of Development Economics, Vol. 59, no. 2 (August 1999): 233-252

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