Multinational firms, market integration and trade structure: what remains of the standard goods hypothesis?.

Abstract

In extending traditional empirical trade models with multinational firms, this paper shows the effect of transferring firm specific technology on the trade structure of host countries. For Belgium, a small open economy with a large presence of multinational firms, this effect is of crucial importance and by neglecting it previous studies appeared to have produced biased results. The results show how the large multinational presence induced by the European integration has shifted Belgium's trade structure towards differentiated products, making the standard goods hypothesis less appropriate to describe the trade composition of small open economies characterized by a large presence of multinational firms.Integration; Structure; Trade;