International Market Structuring with a Multinational Enterprise

Abstract

This paper examines the economic rationales and conditions for the emer gence of multinational enterprises (MNEs). Promoting production efficiency is not sufficient to justify the emergence of an MNE. With taxes in the model, tax authorities heavily tax an MNE’s economic activities, in which case an MNE becomes harder to justify on welfare grounds. This arises from the public good n a t u r e of MNEs and suggests a tax policy coordination to foster welfare