Open Economies Review

, Volume 19, Issue 2, pp 203–219 | Cite as

Multinationals: Too Many or Too Few?— The Proximity–concentration Trade-off

Research article


The paper builds an analytically tractable model that illustrates the “proximity–concentration trade-off” involved in horizontal multinationals. For low trade costs, firms are single-plant firms, for intermediate costs, some are single-plant firms whereas others are multinationals, for large trade costs, firms are multinationals. Because of the modeling strategy, the model is suited for a welfare analysis of multinationals. It shows that too many firms choose to concentrate their production in only one location. Also, for some transport costs, a reduction in transport costs worsens welfare.


Globalization Economic integration Trade costs Multinational firms Welfare 

JEL Classification

F12 F15 F23 H23 


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Copyright information

© Springer Science+Business Media, LLC 2007

Authors and Affiliations

  1. 1.FUNDP–University of NamurNamurBelgium
  2. 2.CORE–Université Catholique de LouvainLouvain-la-NeuveBelgium
  3. 3.IZABonnGermany

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