TY  - JOUR
AU  - Zhang,Kevin H.
AU  - Markusen,James R.
TI  - Vertical Multinationals and Host-Country Characteristics
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6203
PY  - 1997
Y2  - September 1997
UR  - http://www.nber.org/papers/w6203
L1  - http://www.nber.org/papers/w6203.pdf
N1  - Author contact info:
James R. Markusen
Department of Economics
University of Colorado
Boulder, CO 80309-0256
Tel: 303/492-0748
Fax: 303/492-8960
E-Mail: james.markusen@colorado.edu
AB  - The literature on multinationals and developing countries has examined the causality" running from direct investment to changes in country characteristics (wages skills, etc.) and also the opposite direction of causality, from existing country characteristics to" inward direct investment.  This paper contributes to the second line of research the question of what country characteristics, particularly market size and labor-force" composition, attract inward investment.  This approach is motivated by the empirical" observation that the poorest countries attract a far smaller share of world direct investment than" their share of income.  Small markets receive less investment per capita than larger ones.  We" develop a model that generates both stylized facts in equilibrium, suggesting the existence of a" development trap for small, skilled-labor-scarce countries.
ER  -