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Gravity for FDI

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We derive gravity equations from three different general equilibrium models incorporating multinational firms. We show that gravity equations are partic- ularly adapted to the analysis of foreign affiliates' activities of multinational firms. However, the different theoretical models lead to different specifications and interpretations of the empirical results. This is particularly the case considering gravity equations derived from factor proportion models compared to those derived from proximity concentration theories.

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Jörn Kleinert, Farid Toubal

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Adapt according to the presented license agreement and reference the original author.