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Preferential trade areas, multinational enterprises, and welfare

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  • Priya Ranjan

Abstract

. The effects of preferential trade areas (PTAs) on the investments by multinational enterprises and their implications for the welfare of members and non‐members are studied in a model with two types of firms: national firms and multinational firms. In the presence of multinational activity PTAs can create new investment as well as divert investment from non‐members to members. Both affect the welfare of members positively. More interestingly, if the investment creation effect of a PTA is sufficiently strong, then the PTA could be welfare enhancing for non‐members as well. JEL classification: F2, L1 Aires préférentielles de commerce, entreprises plurinationales, et bien‐être. On étudie les effets des aires préférentielles de commerce (APC) sur les investissements par les entreprises plurinationales et leurs implications pour le bien‐être des pays membres et non membres à l’aide d’un modèle où l’on retrouve deux genres d’entreprises : les entreprises nationales et plurinationales. Quand des opérations plurinationales existent, les APC peuvent créer de nouveaux investissements mais aussi déplacer certains investissements des pays non membres vers les pays membres. Ces deux effets affectent le niveau de bien‐être des pays membres positivement. Il est intéressant de noter que si l’effet de création d’investissements d’une APC est suffisamment puissant, l’APC peut entraîner une augmentation du niveau de bien‐être des pays non membres.

Suggested Citation

  • Priya Ranjan, 2006. "Preferential trade areas, multinational enterprises, and welfare," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 39(2), pages 493-515, May.
    • Handle: RePEc:wly:canjec:v:39:y:2006:i:2:p:493-515
    DOI: 10.1111/j.0008-4085.2006.00357.x
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    2. Shawn ARITA & TANAKA Kiyoyasu, 2013. "Regional Investment Liberalization and FDI," Discussion papers 13088, Research Institute of Economy, Trade and Industry (RIETI).

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    More about this item

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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