AN EMPIRICAL-ASSESSMENT OF THE PROXIMITY-CONCENTRATION TRADE-OFF BETWEEN MULTINATIONAL SALES AND TRADE

This paper examines the extent to which multinational location decisio ns reflect a trade-off-between achieving proximity to customers and co ncentrating production to achieve scale economies, It finds that overs eas production by multinationals increases relative to exports the hig her are transport costs find trade barriers and the lower are investme nt barriers and scale economies at the plant level relative to the cor porate level. However, it is not possible to reject a model with only country and industry effects. The evidence also suggests that multinat ional activity is more likely the more similar are the home and foreig n markets-contrary to conventional wisdom.