The Theory of Endowment, Intra-Industry, and Multinational Trade

44 Pages Posted: 6 Sep 1996 Last revised: 12 Aug 2022

See all articles by James R. Markusen

James R. Markusen

University of Colorado at Boulder - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Anthony J. Venables

University of Oxford; Centre for Economic Policy Research (CEPR)

Date Written: April 1996

Abstract

We consider a trade model combining a 2x2x2 Heckscher-Ohlin structure, monopolistic competition, transport costs, and multinational corporations. We demonstrate how the mix of national and multinational firms that operate in equilibrium depends on technology and on the division of the world endowment between countries. Multinationals are more likely to exist the more similar are countries in both relative and absolute endowments. Where multinationals exist they reduce the volume of trade and raise world welfare (although not necessarily that of both countries). They also reduce the agglomeration forces that arise when international factor mobility is allowed.

Suggested Citation

Markusen, James R. and Venables, Anthony J., The Theory of Endowment, Intra-Industry, and Multinational Trade (April 1996). NBER Working Paper No. w5529, Available at SSRN: https://ssrn.com/abstract=4194

James R. Markusen (Contact Author)

University of Colorado at Boulder - Department of Economics ( email )

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Anthony J. Venables

University of Oxford ( email )

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