María C. Latorre

On the Differential Behaviour of National and Multinational Firms: A Within- and Across-sectors Approach

This paper looks for different patterns of behaviour of national firms and multinational enterprises (MNEs). Its main contribution is the use of a computable general equilibrium perspective to analyse firms’ performance. The model is calibrated for the case of the Czech Republic, which has been a very attractive foreign direct investment location in the last three decades. We replicate the arrival of MNEs to different sectors of this country in turn and analyse the responses of both types of firms across the 20 different sectors in which the Czech economy has been split. Our results grasp the short‐run impact. The higher labour intensity of national firms leads them to different patterns of production and labour demand, compared with MNEs operating within the same sector. The demand side of the model (particularly, exports and private consumption) drives the evolution of production and labour demand across sectors. Regarding prices, we also find a differential pattern between both types of firms within and across sectors. Our analysis offers detailed evidence on how the impact of MNEs will differ depending on the sector to which they arrive. Finally, the aggregate results suggest that a completely different microeconomic panorama may underlie rather similar macroeconomic outcomes.

The Impact of Foreign Direct Investment on the Production Networks between China and East Asia and the Role of the USA and the Rest of the World as Final Markets

Abstract A three factor, four region and 15 sector computable general equilibrium (CGE) model is used to study the impact of foreign direct investment (FDI) accruing to China. We focus on the sectors of Electronics, Machinery and Textiles which account for 55.4% and 40% of Chinese overall exports and imports, respectively. Our data confirm the existence of production networks between China and East Asia and the role that the USA and the rest of the world (ROW) play as final markets. Based on these differentiated geographical roles and on the contrasting production technologies, we offer an in-depth analysis for macro- and micro-variables across the four regions.

No trans-pacific partnership? Good or bad for Mexico?

Purpose The purpose of this paper is as follows: first, it aims to explain the overall economic implications of the trans-pacific partnership (TPP). Second, it aims to provide an in-depth analysis of the TPP’s quantitative impact on an upper-middle economy such as Mexico, as well as on the USA. Design/methodology/approach The analysis is performed using a computable general equilibrium (CGE) model. Findings The results suggest that in the short run, both Mexico and the USA would slightly benefit from the TPP. Tariff reductions would lead to less bilateral trade between Mexico and the USA and the stronger integration of both countries with the rest of the TPP members. The opposite is true after a decrease in non-tariff barriers (NTBs). Overall, in terms of the impact on Mexico, trade integration with the rest of the TPP members prevails. This suggests that a TPP without the USA could still be beneficial. Originality/value Previous studies on the TPP have mainly focused on its impact for the USA, which is also analysed in the present study. The effects of the TPP are estimated for a broad set of micro and macroeconomic variables, paying particular attention to the reductions of NTBs.

CGE Analysis of the Impact of Foreign Direct Investment and Tariff Reform on Female and Male Wages

This study analyzes the impact on male and female wages of tariff reform and the reduction of regulatory barriers faced by domestic and foreign firms operating in business services. The study applies the model to Tanzania and develops a data set that distinguishes labor and wages by gender for 52 sectors and four skill categories. The model is the first to incorporate modern trade theory to assess the gender implications of trade reform. Given that the Dixit-Stiglitz framework results in productivity gains from additional varieties of services, the analysis finds that real wages increase across all worker categories. However, the increase in wages is higher for males than for females, because business services use males more intensively than females. The most skilled (female and male) workers, who are also the most intensively used in the business services sectors, benefit more from the real increases in wages. The model illustrates that as the development process continues and developing countries become more business service oriented, these sectors demand more educated workers and their wages will increase relative to those of unskilled workers. The policy conclusion from this model is that it is crucial to invest in the education of females so their human capital increases and their skills are more marketable in business services and other more technologically modern occupations. Otherwise, the wage gap between males and females would likely widen further.

Multinationals in the Czech Motor Vehicles Industry: A General Equilibrium Analysis for a Transition Economy

Abstract This study offers a computable general equilibrium methodology to analyse the involvement of multinationals in the motor vehicles sector in the post-communist Czech Republic. This allows estimating not only the economy-wide impact, but also the sectoral adjustments in a unified framework. The real levels of foreign direct investment received in the motor vehicles sector seem to produce only limited forward and backward linkages. Therefore, gross domestic product (GDP) and welfare increase slightly—and can even fall—after a certain degree of capital accumulation because saturation effects arise. Profit repatriation considerably exacerbates the negative effect on GDP and welfare.