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Title: Multiproduct Multinationals and Reciprocal FDI Dumping

Author(s): Richard Baldwin and Gianmarco Ottaviano

Publication Date: March 1998

Keyword(s): Foreign Direct Investment, International Investment, International Trade and Multinational Corporations

Programme Area(s): International Trade and Regional Economics

Abstract: The global pattern of foreign direct investment (FDI) is quite similar to the world trade pattern. In particular, intra-industry FDI between rich nations is almost as pervasive as intra-industry trade among rich nations. In the ?standard? multinational corporation (MNC) model (of Markusen, Venables, Brainard, and others), FDI is driven by a trade-off between proximity and scale, so firms typically supply the foreign market via exports or via FDI. The close correlation of two-way trade and investment flows is therefore difficult to explain with the standard model. We propose a model of multiproduct MNCs where firms simultaneously engage in intra-industry FDI and intra-industry trade.

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Bibliographic Reference

Baldwin, R and Ottaviano, G. 1998. 'Multiproduct Multinationals and Reciprocal FDI Dumping'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1851