Trade, Wages, FDI and Productivity

34 Pages Posted: 19 Apr 2011

See all articles by Kristian Giesen

Kristian Giesen

University of Duisburg-Essen

Christian Schwarz

University of Applied Sciences Duesseldorf

Date Written: April 1, 2011

Abstract

We extend the Behrens et al. (2009) general equilibrium heterogeneous firms framework by horizontal foreign direct investment. The model features endogenously determined firm entrants, wages, productivity cutoffs, flexible price markups and allows for wage differentials across countries in equilibrium. The framework is especially suitable to analyze the welfare consequences of attracting FDI since it allows to study through which channels FDI might raise welfare - including the not yet explored impact on the wage differential and the price markups. From a policy perspective we compare a strategic and a cooperative FDI policy scenario and find that supranational coordination leads to welfare gains.

Keywords: Multinational firms, FDI, firm heterogeneity

JEL Classification: F12, F23

Suggested Citation

Giesen, Kristian and Schwarz, Christian, Trade, Wages, FDI and Productivity (April 1, 2011). Ruhr Economic Paper No. 251, Available at SSRN: https://ssrn.com/abstract=1807961 or http://dx.doi.org/10.2139/ssrn.1807961

Kristian Giesen

University of Duisburg-Essen ( email )

Lotharstrasse 1
Duisburg, 47048
Germany

Christian Schwarz (Contact Author)

University of Applied Sciences Duesseldorf ( email )

Münsterstraße
156
Düsseldorf, 40476
Germany

HOME PAGE: http://https://wiwi.hs-duesseldorf.de/personen/christian.schwarz/Seiten/default.aspx

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