Trade and foreign direct investment in a globalized world economy : lessons from models with heterogeneous firms

Abstract

All three chapters of this thesis explore how models with heterogeneous firms can improve our understanding of international trade and FDI activities of firms in a globalized world economy. The first chapter 'Gravity and Information': Heterogeneous Firms, Exporter Networks and the `Distance Puzzle"' addresses the issue that distance effects in empirical gravity equations appear to be too high to be explained by transport costs alone. The second chapter 'Export-Supporting FDI' investigates the role of `export-supporting' activities of multinational companies. In the third chapter 'Heterogeneous Firms', `profit shifting' FDI and International Tax competition" which is joint work with Tim Schmidt-Eisenlohr, we propose a stylized model of international tax competition between a large country and a tax haven.