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The role of multinational production in a risky environment

Ramondo, Natalia and Rappoport, Veronica (2010) The role of multinational production in a risky environment. Journal of International Economics, 81 (2). pp. 240-252. ISSN 0022-1996

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Abstract

This paper explores the aggregate consequences of Foreign Direct Investment (FDI) on the opportunities for risk diversification available to consumers. The crucial difference between FDI and other international financial flows is that the former involves technology flows across countries. We present a model where firm-embedded productivity can be transferred costly across countries through the activity of multinational firms. We find that risk patterns affect multinationals' location decisions and, in turn, these decisions change the scope for international risk diversification even in a world with complete financial markets.

Item Type: Article
Official URL: http://www.sciencedirect.com/science/journal/00221...
Additional Information: © 2010 Elsevier V.B.
Library of Congress subject classification: H Social Sciences > H Social Sciences (General)
Sets: Departments > Management
Research centres and groups > Managerial Economics and Strategy Group
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 12 Nov 2013 09:42
URL: http://eprints.lse.ac.uk/50046/

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