Multinational Enterprises

The turn of the 21st century has seen a dramatic increase in foreign direct investment, with investment flows substantially outstripping export and import flows in most years for most developed countries. This has had an equally dramatic impact on the means by which companies conduct their international business. This advanced seminar course develops a systematic analysis of the motives for foreign direct investment, which creates multinational enterprises. The theoretical part of the course builds a series of models that shed light on the primary forces that motivate firms to switch from exporting to multinational production. Also investigated are some of the potential welfare impacts of the decision to become a multinational enterprise, on both host and home countries, and some of the empirical issues that arise when we try to explain patterns of international production and attempt to quantify the effects of multinationals on home and host nations. Prerequisites: Economics 11 and 13 (or Economics 14). A previous game theory and/or international economics course would also be useful.