Journal article
Trade and investment in the global economy: A multi-country dynamic analysis
European economic review, Vol.120, p103311
01 Nov 2019
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
We develop a multi-country trade model with domestic investment in physical capital and foreign direct investment (FDI) in the form of non-rival technology capital. Gravity subsystems for FDI and trade nest with accumulation/decumulation of physical and technology capital in transition to the steady state. The key innovation of our work is the modeling and quantification of the general equilibrium links between trade and investment in the global economy. The importance of FDI is quantified in our calibrated model by comparing aggregate data for 89 countries in 2011 to a counterfactual world without outward and inward FDI from and to low- and lower-middle-income countries. World welfare loss from FDI removal in the poorer countries in the world is around 6%, while world trade falls around 7%, unevenly distributed among winners and losers. Net exports of FDI substitute for export trade across countries. (C) 2019 Elsevier B.V. All rights reserved.
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Details
- Title
- Trade and investment in the global economy: A multi-country dynamic analysis
- Creators
- James E. Anderson - Boston CollegeMario Larch - University of BayreuthYoto V. Yotov - Drexel University
- Publication Details
- European economic review, Vol.120, p103311
- Publisher
- Elsevier
- Number of pages
- 26
- Grant note
- Global Affairs Canada; CGIAR
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Economics (School of Economics)
- Identifiers
- 991019167547804721
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