MULTINATIONALS, MULTI-PLANT ECONOMIES, AND THE GAINS FROM TRADE

A general equilibrium model of a multinational enterprise based on economies of multi-plant operation is developed. These economies are modelled as arising from the existence of a joint input whose productivity in each production facility is independent of the number of facilities maintained by a firm. The multinational thus offers the world increased technical efficiency by eliminating the duplication of the joint input that would occur with independent national firms. Since this technical efficiency may come at the expense of increased market power, the full determinants of home country, host country, and world welfare are considered.