imprint:
Cambridge, Mass: National Bureau of Economic Research, October 2011
Published in:NBER working paper series ; no. w17550
Extent:
1 Online-Ressource
Language:
English
DOI:
10.3386/w17550
Identifier:
Reproduction note:
Hardcopy version available to institutional subscribers
Origination:
Footnote:
Mode of access: World Wide Web
System requirements: Adobe [Acrobat] Reader required for PDF files
Description:
We study patterns of FDI in a multi-country world economy. We develop a model featuring non-homothetic preferences for quality and monopolistic competition in which specialization is purely demand-driven and the decision to serve foreign countries via exports or FDI depends on a proximity-concentration trade-off. We characterize the joint patterns of trade and FDI when countries differ in income distribution and size and show that FDI is more likely to occur between countries with similar per capita income levels. The model predicts a Linder Hypothesis for horizontal FDI, which is consistent with the patterns we find using establishment-level data on multinational activity