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Trade and investment in the global economy: A multi-country dynamic analysis
Journal article   Peer reviewed

Trade and investment in the global economy: A multi-country dynamic analysis

James E. Anderson, Mario Larch and Yoto V. Yotov
European economic review, v 120, p103311
01 Nov 2019
DOI: https://doi.org/10.1016/j.euroecorev.2019.103311
Featured in Collection :   UN Sustainable Development Goals @ Drexel

Abstract

Business & Economics Economics Social Sciences
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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48 citations in Web of Science
56 citations in Scopus

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UN Sustainable Development Goals (SDGs)

This publication has contributed to the advancement of the following goals:

#9 Industry, Innovation and Infrastructure
#8 Decent Work and Economic Growth

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Collaboration types
Domestic collaboration
International collaboration
Web of Science research areas
Economics
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