Year: 2001
Title:
Multinational Enterprises and New Trade Theory: Evidence for the Convergence Hypothesis
JEL: F23, F12
Authors:
S. Barrios, University of Manchester
H. Gšrg, University of Nottingham
E. Strobl, University College Dublin
Abstract:
According to the 'convergence hypothesis' multinational enterprises 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 (JIE 1998) as a theoretical framework, we explicitly develop empirical measures to proxy bilateral FDI between two countries and address their properties with regard to the convergence hypothesis. Using a panel of data of country pairs over the years 1985-96 we econometrically test for the relationship between convergence and bilateral FDI. Our results provide some empirical support for the convergence hypothesis.
Keywords:
Multinational Enterprises, New Trade Theory, Convergence
Contact address: holger.gorg at nottingham.ac.uk
Paper URL: http://www.nottingham.ac.uk/economics/leverhulme/research_papers/00_19.pdf
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