Competition for foreign direct investment in the product cycle

The paper develops a dynamic model of the North-South product cycle, in whi ch Northern firms continuously transfer production to two Southern countrie s through foreign direct investment (FDI), The technologies of Northern mul tinationals are eventually imitated by Southern firms. The competition amon g Southern countries for FDI through R&D, trade, FDI and intellectual prope rty rights policies are examined, A Southern countrys subsidy to attract in ward FDI benefits its production workers at the expense of those in other S outhern countries. However, a Southern country's import tariffs against the North benefit the production workers of all Southern countries. (C) 2001 E lsevier Science B.V. All rights reserved.