Dynamic analysis of location choice by multinational firms

This paper constructs a North–South endogenous growth model to investigate how the organizational forms of final goods firms evolve. Initially, the final goods firms in the North obtain intermediate goods from Northern firms and produce in the North. When trade costs are sufficiently low, as the economy develops, the final goods firms produce the final goods in the North and obtain the intermediate goods from Southern firms. As the economy develops further, they produce the final goods in the South and obtain intermediate goods from Southern firms.