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Gravity equations explaining foreign affiliates' sales are ad hoc and hence, estimated coeffcients are hard to interpret. We therefore provide the theoretical underpinnings of the gravity equation applied to the analysis of sales of foreign affiliates of multinational firms. We argue that the...
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We propose a multi-country general equilibrium model with three sectors and heterogeneous firms to analyze the linkages … each other and one "workbench country" that specializes on the production of an intermediate good and engages in inter …-industry trade with each of the advanced countries. We show analytically that a closer integration of a "workbench country" into the …
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