Welfare and trade elasticity with multinational production |
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Authors: | Pamela Bombarda Stefania Marcassa |
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Institution: | 1. Université de Cergy-Pontoise THEMA (UMR CNRS 8184), Cergy-Pontoise Cedex, France;2. Université de Cergy-Pontoise THEMA, Cergy-Pontoise Cedex, France |
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Abstract: | We explore welfare properties in a firm heterogeneity model with multinational production and export. The presence of multinational production plays a crucial role in delivering a partial trade elasticity of total sales by exporters and affiliates that is no longer constant, and depends on both supply and demand parameters. We then analyse counterfactual scenarios. Multinational production with intra-firm trade increases welfare gains by up to 4% with respect to a model with only export and no truncation. Multinational production à la Helpman et al. (American Economic Review, 2004, 94 , 300) generates the largest welfare gains from liberalisation. |
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Keywords: | elasticity export multinational production welfare |
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