We study the determinants of the location of sub-contracted activity in a general equilibrium model of outsourcing and trade. We model outsourcing as an activity that requires search for a partner and relationship-specific investments that are governed by incomplete contracts. The extent of...

Economic interactions among the high-income developed countries are characterized by high degrees of both intra-industry trade and intra-industry affiliate production and sales. Similar high-income countries both heavily trade with and invest into each other. The purpose of this paper is to show...

We develop a general equilibrium model of monopolistic competition and trade based on indirectly additive preferences and heterogenous firms. It generates markups independent from destination population but increasing in destination per capita income, as documented empirically. Trade...

This paper presents and tests a new model of multinational firms to explain a rich array of multinational behavior. In contrast to most approaches, here the multinational faces costs to transferring its know-how that are increasing in technological complexity. Costly technology transfer gives...

We study the determinants of the extent of outsourcing and of direct foreign investment in an industry in which producers need specialized components. Potential suppliers must make a relationship-specific investment in order to serve each prospective customer. Such investments are governed by...

The global pattern of foreign direct investment (FDI) is quite similar to the world trade pattern. In particular, intraindustry FDI between rich nations is almost as pervasive as intraindustry trade among rich nations. In the standard' MNC model (of Markusen, Venables, Brainard, and others), FDI...

Beginning in the early 1980s, theoretical analyses have incorporated the multinational firm into the microeconomic, general-equilibrium theory of international trade. Recent advances indicate how vertical and horizontal multinationals arise endogenously as determined by country characteristics,...

Most international commerce is carried out by multinational firms, which use their foreign affiliates both to serve the market of the host country and to export to other markets outside the host country. In this paper, I examine the determinants of multinational firms' location and production...

This paper develops a model in which the rivalry of oligopolistic firms serves as an independent cause of international trade. The model shows how such rivalry naturally gives rise to "dumping" of output in foreign markets, and shows that such dumping can be "reciprocal" -- that is, there may be...

The Cobden-Chevalier treaty of 1860 eliminated many French import prohibitions and lowered tariffs between France and Britain. Policy change was largely unexpected and unusually free from direct lobbying. A series of commercial treaties with other nations followed because of the use of the...