International Trade and Location of Large Firms

The new international trade theory has shown that trade among countries does not necessarily depend on international differences in technology and factor endowments. Instead, trade is the result of the exploitation of scale economies and scope economies, and more concretely of the migration of labor to the regions where a larger variety of products are produced. This paper, using publicly available data on the 2000 largest global companies, provides preliminary empirical evidence of the role that large corporations play in the trade capacity of the countries where these corporations are located. Specifically, we suggest that the concentration of large firms in certain countries determines the trade capacity of those countries, and that such concentration differs substantially from one country to another