The traditional trade theory predicts that trade in goods perfectly substitutes for direct movement of factors. This equivalence between goods trade and factor movements, however, depends crucially on assumptions about the production. This paper establishes necessary and sufficient conditions...

We consider two channels via which foreign inputs into industrial production may lead to productivity effects. The first one concerns dynamic externalities between firms which share technical and organizational knowledge which is vital for the productivity growth of a particular industry. We...

The Eastern enlargement of the European Union (EU) is likely to give a further boost to trade and capital flows, yet empirical evidence on the possible magnitudes is still scarce. This paper uses four different datasets to estimate the determinants of international asset holdings and trade...

Mercosur countries have witnessed a boom of foreign direct investment (FDI) inflows since the early 1990s. However, regional integration, viewed in isolation, was not sufficient for the subregion to regain its attractiveness to FDI. FDI growth in individual Mercosur countries was closely related...

This paper discusses environmental policies in response to foreign direct investment (FDI) in a symmetrie two-country setting, where firms' behavior affects government policy decisions. We show that two alternative equilibria with FDI are possible: (i) one with unilateral FDI, where one firm is...