The Time Pattern of the Internationalization of Production

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Abstract
This paper offers an explanation for the development of international trade, foreign direct investment and the activity of multinational companies in developed countries after the Second World War. A two-country±two-sector±onefactor general equilibrium model is set up and applied in an evolutionary framework. The model features the stylized facts: exports and production abroad increase with falling distance costs, exports increase earlier than production abroad and companies in larger countries internationalize their production earlier than their competitors in smaller countries do.

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