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Trade and the Internationalization of Production

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dc.creator Kleinert, Jörn
dc.date 2002
dc.date.accessioned 2013-10-16T06:56:36Z
dc.date.available 2013-10-16T06:56:36Z
dc.date.issued 2013-10-16
dc.identifier http://hdl.handle.net/10419/17756
dc.identifier ppn:348213794
dc.identifier.uri http://koha.mediu.edu.my:8181/xmlui/handle/10419/17756
dc.description Whereas many empirical studies show that the internationalization of production is driven by falling distance costs, theoretical models of the endogenous emergence of multinational enterprises predict the opposite. This paper argues that this dichotomy can be resolved if the production process is modeled more realistically by taking the use of intermediate goods into account. The argument is based on a two-country general equilibrium model set up to study companies? internationalization strategies. Companies use specific intermediate goods in their production and can choose between exports and foreign production. In choosing between these alternatives, they face a trade-off between higher variable distance costs when exporting and additional fixed costs when producing abroad. With falling distance costs, exports increase. Furthermore, the profitability of foreign production increases relative to the profitability of exports if the share of intermediate goods used is not too small. With falling distance costs, it might therefore pay for a company to become a multinational enterprise.
dc.language eng
dc.publisher Kiel Institute for the World Economy (IfW) Kiel
dc.relation Kieler Arbeitspapiere 1104
dc.rights http://www.econstor.eu/dspace/Nutzungsbedingungen
dc.subject F12
dc.subject F23
dc.subject L22
dc.subject ddc:330
dc.subject Trade
dc.subject Multinational Enterprise
dc.subject General Equilibrium
dc.subject Multinationales Unternehmen
dc.subject Globalisierung
dc.subject Aussenwirtschaftstheorie
dc.subject Lieferanten-Kunden-Beziehung
dc.subject Vorprodukt
dc.subject Allgemeines Gleichgewicht
dc.subject Transportkosten
dc.subject Auslandsproduktion
dc.subject Theorie
dc.title Trade and the Internationalization of Production
dc.type doc-type:workingPaper


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