Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2009-01-15
Number: 09-004/2
Author-Name: Julian Emami Namini
Author-Workplace-Name: Erasmus University Rotterdam
Author-Name: Enrico Pennings
Author-Workplace-Name: Erasmus University Rotterdam
Title: Horizontal Multinational Firms, Vertical Multinational Firms and Domestic Investment
Abstract: We build a dynamic general equilibrium model with 2 countries, horizontal and vertical multinational activity and endogenous domestic and foreign investment. It is found that horizontal multinational activity always leads to a complementary relationship between domestic and foreign investment. Vertical multinational activity, in contrast, leads to either a substitutional or complementary relationship between domestic and foreign investment, depending on the firms' technologies. We test the theoretical implications with a panel of U.S. multinationals and find empirical support.
Classification-JEL: E22, F21, F23
Keywords: Horizontal multinational firms, vertical multinational firms, domestic investments, neoclassical growth model
File-Url: https://papers.tinbergen.nl/09004.pdf
File-Format: application/pdf
File-Size: 415947 bytes
Handle: RePEc:tin:wpaper:20090004