Multinational Enterprises and New Trade Theory: Evidence for the Convergence Hypothesis

38 Pages Posted: 7 Jun 2001

See all articles by Salvador Barrios

Salvador Barrios

European Commission, JRC - IPTS

Holger Görg

University of Kiel; Kiel Institute for the World Economy

Eric Strobl

Ecole Polytechnique, Paris - Department of Economic Sciences; IZA Institute of Labor Economics

Date Written: June 2001

Abstract

According to the 'convergence hypothesis', multinational companies will tend to displace national firms and trade as total market size increases and as countries converge in relative size, factor endowments, and production costs. Using a recent model developed by Markusen and Venables (1998) as a theoretical framework, we explicitly develop and address the properties of empirical measures to proxy displacement of national by multinational firms between two countries. These empirical measures are then used to test the convergence hypothesis for a panel of data of country pairs over the years 1985-96. Our results provide some empirical support for the convergence hypothesis.

Keywords: Convergence, multinational enterprises, new trade theory

JEL Classification: F21, F23

Suggested Citation

Barrios, Salvador and Gorg, Holger and Strobl, Eric, Multinational Enterprises and New Trade Theory: Evidence for the Convergence Hypothesis (June 2001). Available at SSRN: https://ssrn.com/abstract=272205

Salvador Barrios (Contact Author)

European Commission, JRC - IPTS ( email )

Edificio Expo
C/ Inca Garcilaso s/n
Seville, 41092
Spain
34 954 48 82 08 (Phone)
34 954 48 82 08 (Fax)

Holger Gorg

University of Kiel ( email )

Olshausenstr. 40
D-24118 Kiel, Schleswig-Holstein 24118
Germany

Kiel Institute for the World Economy ( email )

P.O. Box 4309
Kiel, Schleswig-Hosltein D-24100
Germany

Eric Strobl

Ecole Polytechnique, Paris - Department of Economic Sciences ( email )

Ecole Polytechnique
Department of Economics
Paris, 75005
France

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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