An Oligopolistic Heckscher–Ohlin Model of Foreign Direct Investment

17 Pages Posted: 25 Aug 2011

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: September 2011

Abstract

We develop a 2 × 2 × 2 trade model in which one of the two sectors is perfectly competitive and the other is oligopolistic. The oligopoly sector consists of a given number of identical firms for each country, but they are free to locate in either country. 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 the validity of factor price equalization, patterns of trade and gains from trade. Effects of technological progress and preference changes on firm locations are also analysed.

JEL Classification: F12, F23

Suggested Citation

Lahiri, Sajal and Ono, Yoshiyasu, An Oligopolistic Heckscher–Ohlin Model of Foreign Direct Investment (September 2011). Japanese Economic Review, Vol. 62, Issue 3, pp. 331-347, 2011. Available at SSRN: https://ssrn.com/abstract=1916510 or http://dx.doi.org/10.1111/j.1468-5876.2010.00528.x

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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