Community Research and Development Information Service - CORDIS

FP5

Multinational Enterprises and New Trade Theory: Evidence for the Convergence Hypothesis

Project ID: HPSE-CT-1999-00017
Funded under: FP5-HUMAN POTENTIAL

Abstract

According to the �convergence hypothesis' multinational companies 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 (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.

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Record Number: 8405 / Last updated on: 2007-02-15
Category: ANREP