Firms cluster their economic activities to exploit technological and informational spillovers from other firms. Spillovers through the entry of multinational firms can be particularly beneficial to domestic firms because of their technological superiority. Yet, the importance of foreign firm's...

We derive gravity equations from three different general equilibrium models incorporating multinational firms. We show that gravity equations are particularly adapted to the analysis of foreign affiliates\' activities of multinational firms. However, the different theoretical models lead to...