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EconomicaVolume 80, Issue 318, April 2013, Pages 274-299

Global Fixed Capital Investment by Multinational Firms(Article)(Open Access)

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  • aKatholieke Universiteit Leuven, Belgium
  • bMaastricht University, Netherlands
  • cInstitute of Economic Research, Hitotsubashi University, Tokyo, Japan
  • dSenshu University, Tokyo, Japan
  • eUNU-MERIT, Netherlands

Abstract

We develop and test a model of the simultaneous determination of global gross fixed capital investments by multinational firms. We integrate a model of multi-product firms choosing optimal manufacturing locations with a model of dynamic investment optimization. Firms adjust capital stocks in each location in accordance with the expected marginal profitability of capital. Analysis of 1504 fixed capital investment decisions by Japanese multinational firms confirms the prediction that investment is determined not only by total factor productivity, effective demand, and wage levels in the host country, but also by wage levels in other countries in which the firm operates. © 2012 The London School of Economics and Political Science.

Indexed keywords

GEOBASE Subject Index:capital formationdemand analysisindustrial investmentmultinational enterprisenumerical modeloptimizationprofitabilitytotal factor productivitywage
Regional Index:Japan
  • ISSN: 00130427
  • Source Type: Journal
  • Original language: English
  • DOI: 10.1111/ecca.12014
  • Document Type: Article

  Belderbos, R.; Katholieke Universiteit Leuven, Belgium
© Copyright 2013 Elsevier B.V., All rights reserved.

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