Figure 14.4

N2 manufacturing firmsN2 varieties (elasticity )internal returns to scalemonopolistic competition

N1 manufacturing firmsN1 varieties (elasticity )internal returns to scalemonopolistic competition

Farms in 1 Farms in 2

Spe

ndin

g

1-m

m

Manufacturing workers in 2

Farm workers in 2

Consumers in 2

Farm workers in 1

Consumers in 1In

com

e

Spe

ndin

g

(goo

ds)

(far

m la

bor)

(lab

or)

Inco

me

(lab

or)

Inco

me

Spending on manufactures

Spe

ndin

g on

foo

d

Inco

me

(far

m la

bor)

Spe

ndin

g on

foo

d

1-m m Spending on

manufactures

(goo

ds)

T

a

c

b

de

f

Direction of (goods and services flows)

Direction of money flows

Mobility (i)

g

Manufacturing workers in 1

Laborers in the manufacturing sector in region 2; 2mL

Laborers in the manufacturing sector in region 1; 1mL

Laborers in the food sector in region 1; 1(1- m)L

Laborers in the food sector in region 2; 2(1- m)L

Laborers in the food sector (1- m)L

Laborers in the manufacturing sector; mL

Total number of laborers; L

(1-m) m

1 2 1 2

Note: 1 + 2 = 1 Note: 1 + 2 = 1 Mobility

Sustain points

Break point

Transport costs T10

1

1

0.5

Stable equilibria

Unstable equilibria

B

S0

S1

Basin of attraction for spreading equilibrium

Basin of attraction for agglomeration in region 1

Basin of attraction for agglomeration in region 2

Figure 14.9

Foreign Direct Investment

Greenfield Investments Mergers and Acquisitions (M&A)

Mergers Acquisitions

Full acquisition (100%)

More than 50% acquistion

10% - 49% acquisition

22% 78%

3% of M&A 97% of M&A

65% of M&A 15% of M&A 16% of M&A

Figure 15.3

Headquarters in Austria

Headquarters in Bolivia

Firm level fixed costs FwA

Firm level fixed costs FwB

Plant level fixed costs GwA

Plant level fixed costs GwB

Plant level fixed costs GwA

Plant level fixed costs GwB

+

Multi-plant production?

mB; multinational firm, headquarters in Bolivia

MC in A = cwA

MC in B = cwB

mA; multinational firm, headquarters in Austria

MC in A = cwA

MC in B = cwB

nB; national firm, headquarters in Bolivia

MC in A = (c+t)wB

MC in B = cwB

nA; national firm, headquarters in Austria

MC in A = cwA

MC in B = (c+t)wA

Multi-plant production?

+

yesyesno no

Headquarter location

nA firms?

nB firms? nB firms?

mA firms? mA firms?mA firms? mA firms?

mB firms?mB firms? mB firms? mB firms? mB firms? mB firms? mB firms? mB firms?

3 4 5 6 8721 9 10 11 12 13 14 15 16

yes

yes

yes

yes

yes

yes

yesyesyesyes

yes

yesyesyes

yes

nonononono nonono

no nonono

no no

no

Multinational firms only

nA nA nAnAnAnA nAnAnB nB nBnBnB nB nB nBmA mA mA mAmA mAmA mAmB mBmBmB mB mBmB mB

Mixed MixedMixed

National firms only

Figure 15.9

labor

capi

tal

OA

OB

Austria largeBolivia small

Austria smallBolivia large

Austria capital abundantBolivia labor abundant

Austria labor abundantBolivia capital abundant

C

Figure 15.10

.95

.90

.80

.85

.75

.70

.65

.30

.35

.60

.55

.50

.45

.40

.25

.15

.10

.05

.20

.95.90.80 .85.75.70.65.30 .35 .60.55.50.45.40.25.15.10.05 .20

Endowment of labor

End

owm

ent o

f ca

pita

l

OA

OBa. Base scenario

National firms only

Mixed regimes

Multi-national firms only

Figure 15.11a

.95

.90

.80

.85

.75

.70

.65

.30

.35

.60

.55

.50

.45

.40

.25

.15

.10

.05

.20

.95.90.80 .85.75.70.65.30 .35 .60.55.50.45.40.25.15.10.05 .20

Endowment of labor

End

owm

ent o

f ca

pita

l

OA

OBb. Smaller countries; 40%

National firms only

Mixed regimes

Multi-national firms only

Figure 15.11b

Substrate

Media

Motors

Head-Stack Assembly

Head-Gimbal Assembly

Head Fabrication

Semiconductors PCB Stuffing and Other Electronics Assembly

Head-Disk Assembly

Final Assembly

Testing

Component Fabrication Activities

Subassembly Activities Final Assembly Activities

Figure 15.12

good X

good Y

A

B

ppf

Figure 16.2

Number of varieties

quantity

q

Nt = 0 Nt = 1

Figure 16.3

variety

quality

1 2 3 4 5 9876 1413121110 1615

1

4

3

2

7

6

5

10

9

8

11

12

quality at t = 1

quality at t = 0

Figure 16.4

Food

Manufactures

PrA

PrB

CA

CB

ppfA

ppfB

AM

FBM

F

slope = - pm/pf

Figure 17.2

Figure 17.3

CC

A A

quantity

demand supplyprice

q0 q1 q4q3q2

p0

p0(1+t0)

imports with free trade

imports with tariff t0

p0(1+t1)

imports with tariff t1

q5

BB

quantity

price

demand

Dupuit triangle

q

p

qmax

pmax

O

A

Figure 17.6

quantity

price

demand

Dupuit triangle

q0

p

qmax

pmax

O

E0

p+tE1

Harberger triangle

q1

Figure 17.7