International Trade and Multinational Activity: Heterogeneity of Firms, Incentives for Foreign Direct Investment, and International Business Cycle Dynamics

During the last 25 year, the neoclassical Heckscher—Ohlin trade theory has been extended to the ‘new’ trade theory by including imperfect competition and fixed costs into the analysis of trade relations. Furthermore, these micro—oriented trade models are increasingly used to analyze macro—oriented questions. Chapter 2 of this study investigates the dynamic welfare effects of exposure to trade in a new trade model, which is extended by firm heterogeneity. It is analyzed under which condition...