header

Multinational's Entry: Boon or Bane for Non-Frontier Economies?

76 Pages Posted: 12 May 2021 Publication Status: Under Review

See all articles by Maria Bolboaca

Maria Bolboaca

University of St. Gallen - Institute of Economics (FGN)

Guido Cozzi

University of St. Gallen - Institute of Economics (FGN)

Silvia Galli

University of St. Gallen - Institute of Economics (FGN)

Abstract

Most countries in the world are not at the technological frontier, yet their economies grow and fluctuate. This paper sets up a quantitative model of endogenous growth with business cycle fluctuations to analyze the medium frequency fluctuations in non-frontier countries. The growth mechanism is a Schumpeterian creative destruction framework embedded into a real business cycle dynamic stochastic general equilibrium model, with standard and non-standard features. We allow multinational firms to enter the economy and challenge existing incumbents, which permits us to study the tension between their direct positive productivity contribution and their indirect negative contribution through the expected obsolescence of domestic innovators. We estimate the model using a full-information approach and show that multinationals' entry is both boon and bane for non-frontier economies.

Keywords: DSGE; Schumpeterian Growth; Medium Frequencies; Capital In ows; Non-frontier Economies; Multinational Corporations

JEL Classification: E2, E3, F2, F4, O3, O4

Suggested Citation

Bolboaca, Maria and Cozzi, Guido and Galli, Silvia, Multinational's Entry: Boon or Bane for Non-Frontier Economies?. Available at SSRN: https://ssrn.com/abstract=3844757 or http://dx.doi.org/10.2139/ssrn.3844757

Maria Bolboaca

University of St. Gallen - Institute of Economics (FGN) ( email )

Bodanstrasse 1
St. Gallen, 9000
Switzerland

Guido Cozzi (Contact Author)

University of St. Gallen - Institute of Economics (FGN) ( email )

Bodanstrasse 1
St. Gallen, 9000
Switzerland

Silvia Galli

University of St. Gallen - Institute of Economics (FGN) ( email )

Bodanstrasse 1
St. Gallen, 9000
Switzerland

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
322
Downloads
75
PlumX Metrics