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Foreign Direct Iinvestment and the Single Market

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  • J Peter Neary

    (University College Dublin)

Abstract

This paper extends the theory of multinational corporations, identifying three distinct influences of internal trade liberalisation by a group of countries on the level and pattern of inward foreign direct investment (FDI). First, the tariff-jumping motive encourages plant consolidation. Second, the export platform motive favours FDI with only a single union plant relative to exporting, and may induce a firm which has never exported to invest. Finally, reduced internal tariffs increase competition from domestic firms, which dilutes the other motives and may induce a "Fortress Europe" outcome of multinationals leaving union markets even though external tariffs are unchanged.

Suggested Citation

  • J Peter Neary, 2001. "Foreign Direct Iinvestment and the Single Market," Working Papers 200124, School of Economics, University College Dublin.
    • Handle: RePEc:ucn:wpaper:200124
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Foreign direct investment; market integration; multinational corporations; Single Market;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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