Reconciling the Evidence on the Knowledge-Capital Model

17 Pages Posted: 1 Nov 2005

See all articles by Henrik Braconier

Henrik Braconier

Research Institute of Industrial Economics (IUI); Ministry of Finance

Pehr-Johan Norbäck

Research Institute of Industrial Economics (IFN)

Dieter M. Urban

Johannes Gutenberg University of Mainz - Institute for International Economic Theory; CESifo (Center for Economic Studies and Ifo Institute)

Abstract

The knowledge-capital model (KC model), described in Markusen (2002), encompasses both market size (horizontal) as well as factor endowment (vertical) explanations to why multinational production occurs. Although the KC model seems intuitively appealing the empirical support has, so far, been mixed and even confused. In this study we find strong, robust and consistent support for the KC model. In contrast to previous studies, our empirical specification is directly mapped from theory. We also use an enlarged dataset, where the data coverage is significantly improved. Our results also give estimated surfaces remarkably similar to theoretical simulations of the KC model. In addition, the results give important insights into why previous studies have yielded such diverse results.

Suggested Citation

Braconier, Henrik and Norbäck, Pehr-Johan and Urban, Dieter M., Reconciling the Evidence on the Knowledge-Capital Model. Review of International Economics, Vol. 13, No. 4, pp. 770-786, September 2005, Available at SSRN: https://ssrn.com/abstract=806325

Henrik Braconier (Contact Author)

Research Institute of Industrial Economics (IUI) ( email )

P.O. Box 5501
S-114 85 Stockholm
Sweden
+46 8 665 4537 (Phone)
+46 8 665 4599 (Fax)

Ministry of Finance ( email )

Drottinggatan 21
Stockholm 10333
Sweden

Pehr-Johan Norbäck

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Dieter M. Urban

Johannes Gutenberg University of Mainz - Institute for International Economic Theory ( email )

D 55099 Mainz
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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