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Multinational Firms, Integration and Economic Growth

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  • José Pedro Pontes

Abstract

The importance and the impacts of horizontal multinational corporations in the context of integration and economic growth processes are examined. A noncooperative game with two firms that choose to have either one or two plants located in two asymmetric countries is used. The firms compete purely through location. Economic integration has an ambiguous impact upon foreign direct investment. On one hand, it decreases trade costs and easies the access to foreign markets through exports. On the other hand, through economic growth, it increases the size of the markets with relation to plant fixed costs and makes multinationals economically feasible. The latter effect, entails a decentralisation of production towards the smaller country.

Suggested Citation

  • José Pedro Pontes, 2001. "Multinational Firms, Integration and Economic Growth," Working Papers Department of Economics 2001/11, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    • Handle: RePEc:ise:isegwp:wp112001
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    Cited by:

    1. K. Yamamoto & T. Morita & F. Cerina, 2013. "Integration and Welfare with Horizontal Multinationals," Working Paper CRENoS 201307, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.

    More about this item

    Keywords

    Multinationals; Location; Noncooperative games.;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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