Preferential trade areas, multinational enterprises, and welfare

doi:10.1111/j.0008-4085.2006.00357.x

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Wiley InterScience

Canadian Journal of Economics/Revue canadienne d'économique

Volume 39 Issue 2, Pages 493 - 515

Published Online: 8 May 2006

Published on behalf of the Canadian Economics Association

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ABSTRACT

Abstract. The effects of preferential trade areas (PTAs) on the investments by multinational enterprises and their implications for the welfare of members and non‐members are studied in a model with two types of firms: national firms and multinational firms. In the presence of multinational activity PTAs can create new investment as well as divert investment from non‐members to members. Both affect the welfare of members positively. More interestingly, if the investment creation effect of a PTA is sufficiently strong, then the PTA could be welfare enhancing for non‐members as well. JEL classification: F2, L1

ABSTRACT

Aires préférentielles de commerce, entreprises plurinationales, et bien‐être. On étudie les effets des aires préférentielles de commerce (APC) sur les investissements par les entreprises plurinationales et leurs implications pour le bien‐être des pays membres et non membres à l'aide d'un modèle où l'on retrouve deux genres d'entreprises : les entreprises nationales et plurinationales. Quand des opérations plurinationales existent, les APC peuvent créer de nouveaux investissements mais aussi déplacer certains investissements des pays non membres vers les pays membres. Ces deux effets affectent le niveau de bien‐être des pays membres positivement. Il est intéressant de noter que si l'effet de création d'investissements d'une APC est suffisamment puissant, l'APC peut entraîner une augmentation du niveau de bien‐être des pays non membres.

Received: 28 February 2002; Accepted: 09 September 2002;

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10.1111/j.0008-4085.2006.00357.x About DOI

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