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Foreign direct investment and international trade in a continuum Ricardian trade model

Authors Cheng, Leonard Kwok-Hon View this author's profile
Qiu, Larry Dongxiao HKUST affiliated (currently or previously)
Tan, Guofu HKUST affiliated (currently or previously)
Issue Date 2005
Source Journal of development economics , v. 77, (2), 2005, AUG, p. 477-501
Summary We develop a continuum Ricardian trade model to capture both North-South trade and technology transfer via foreign direct investment (FDI) by multinational enterprises (MNEs). We show that there is a unique range of products produced in the South by MNEs. If the ability of Southern workers in absorbing Northern technology increases, (a) the range of MNE production increases, (b) Northern worker's welfare and Southern workers' welfare change in opposite directions, and (c) the world aggregate welfare increases under certain conditions. This model can also be used to explore issues such as North-South wage gaps, FDI policies and the product cycle.
ISSN 0304-3878
Language English
Format Article
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