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GTAP Resource #3216

"Multinationals in the Motor vehicles industry: A general equilibrium analysis for a Transition Economy"
by Latorre, Maria and Antonio Gomez-Plana

The fall of the Berlin Wall opened new markets for western MNEs. One of the most striking processes of MNEs’ entry has taken place in the sector of Motor vehicles in some Central European countries, leading to a reorganisation in Europe’s car production. This article analyses the economy wide and sectoral effects for a host economy by means of a computable general equilibrium (CGE) model.

This methodology allows us to concentrate in a number of effects arising from the presence of MNEs, and derive their economy-wide impact in a unified framework. We have expanded a well-known – and publicly available – CGE model to include MNEs. This is the GTAP model (Hertel, 1997; Rutherford, 2005), which is highly relevant because it is designed to make use of a very rich database of the world economy. We also wanted to introduce MNEs in the model in such a manner that OECD (several years) data on the activities of MNEs could be used, as the latter are absent in the GTAP database. By doing this we overcome the problem of obtaining data for general equilibrium simulations considering MNEs, which has been partly the reason why most applied trade models have not included the role of MNEs for a long time.

The model has been applied to the impact of a higher involvement of MNEs operating in Motor vehicles in the Czech economy. The presence of MNEs in the Motor vehicles’ sector of the Czech Republic is prominent and the statistics show that this economy has headed the growth rates in passenger cars production.

The important role of MNEs in Motor vehicles can generate some effects that policymakers should take into account when designing policy measures, such as, the role of profit repatriation in national welfare, the distributional effects because of changes in factor rents and the differential impact on production across sectors.

Resource Details (Export Citation) GTAP Keywords
Category: 2010 Conference Paper
Status: Published
By/In: Presented at the 13th Annual Conference on Global Economic Analysis, Penang, Malaysia
Date: 2010
Version: Europe Asia Studies, vol. 63 (8), pp. 1425-1447
Created: Latorre, M. (3/26/2010)
Updated: Batta, G. (1/5/2012)
Visits: 1,687
- Foreign direct investment
- The GTAP Data Base and extensions
- Europe (Western)

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Special Instructions
This paper is the previous version of: Latorre, María C. and Antonio Gomez Gomez-Plana (2011) "Multinationals in the Motor vehicles industry: A general equilibrium analysis for a Transition Economy", Europe Asia Studies, vol. 63 (8), pp. 1425-1447.

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