An Oligopolistic Heckscher-Ohlin Model of Foreign Direct Investment

25 Pages Posted: 1 Jul 2008

See all articles by Sajal Lahiri

Sajal Lahiri

Southern Illinois University Carbondale - Department of Economics

Yoshiyasu Ono

Osaka University - Institute of Social and Economic Research (ISER)

Date Written: July 1, 2008

Abstract

We develop a two-country, two-good, and two-factor model of international trade in which one of the sectors is perfectly competitive and the other one is oligopolistic. The oligopoly sector consists of a given number of identical firms for each country, but they are free to locate in any of the two countries. The allocation of the firms between the two countries is endogenously determined, and changes in factor prices play a crucial role in establishing this equilibrium. Under this framework we examine some of the traditional trade-theoretic issues and also carry out two comparative static exercises.

Keywords: FDI, Oligopoly, Heckscher-Ohlin model

JEL Classification: F12, F23

Suggested Citation

Lahiri, Sajal and Ono, Yoshiyasu, An Oligopolistic Heckscher-Ohlin Model of Foreign Direct Investment (July 1, 2008). Available at SSRN: https://ssrn.com/abstract=1154000 or http://dx.doi.org/10.2139/ssrn.1154000

Sajal Lahiri (Contact Author)

Southern Illinois University Carbondale - Department of Economics ( email )

MC 415
1000 Faner Drive
Carbondale, IL 62901
United States

Yoshiyasu Ono

Osaka University - Institute of Social and Economic Research (ISER) ( email )

6-1 Mihogaoka
Ibaraki, Osaka 567-0047
Japan

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