International production, technology diffusion, and trade

The paper develops a general equilibrium model of international production and trade. Technology is carried across borders by multinational producers and the set of technologies being used in a particular country is endogenous. Production locations are chosen based on the costs of production and getting the product to market. The model incorporates vertical, horizontal, offshoring, and export-platform FDI. Estimated model parameters describe the states of technology in different countries, barriers to international investment, and trade costs. The model is used to quantify the welfare effects of international production and trade and to investigate the effects of free-trade agreements on offshoring.