The third edition of Multinational Enterprise and Economic Analysis surveys the contributions that economic analysis has made to our understanding of why multinational enterprises exist and what consequences they have for the workings of the national and international economies. It shows how economic analysis can explain multinationals' activity patterns and how economics can shed conceptual light on problems of business policies and managerial decisions arising in practice. It addresses the welfare problems arising from multinationals' activities and the logic of governments' preferences and choices in their dealings with multinationals. Suitable for researchers, graduates and upper-level undergraduates. The third edition of this highly accessible book incorporates the many additions to our knowledge of multinationals accumulated in research appearing in the past decade.

MUCH OF THE TRADITIONAL analysis of productivity growth in manufacturing industries has been based explicitly or implicitly on a model in which identical, perfectly competitive plants respond in the same way to forces that strike the industry as a whole. The estimates of growth obtained with this framework are then used as the basis for discussions of policy concerning capital accumulation, research and development, trade, or other issues. This contrasts markedly with the literature of industrial organization in which perfect competition is seen as an unusual market structure and in which the differences among firms are examined in detail. The models of oligopoly that are the staple of the industrial organization literature are then used to examine antitrust policy.

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.

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JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org. This paper tests for certain benefits of foreign direct investment in the manufacturing sectors of two leading host countries-Canada and Australia. A quest for evidence on the effects of the multinational corporation needs little defence at a time when host and source countries alike incline towards restricting its activities.Economic theory tells us that intramarginal2 gains from foreign investment take diverse forms. An evident and tangible gain to the host government stems from the corporate income tax collected from subsidiaries (net of the incremental cost of public services supplied to them). Other benefits, conjectural and elusive but possibly large, lie in the effects of direct investment on the value productivity of resources owned by the host economy (Macdougall, 1960;Corden, 1967;Caves, 1971). The host nation's private sector does not benefit directly because the foreign subsidiary is efficient, or brings to its shores skilled entrepreneurship or productive knowledge. Rather its gains depend on spill-overs of productivity that occur when the multinational corporation cannot capture all quasi-rents due to its productive activities, or to the removal of distortions by the subsidiary's competitive pressure. These potential benefits can be divided into three classes.(1) Allocative efficiency The multinational corporation may provide a significant increase in competition in the host-country market. It tends to populate industries where the barriers to entry by new firms are high. Thus it may pare down monopolistic distortions and raise the productivity of the hostcountry's resources by improving their allocation.(2) Technical efficiencyThe subsidiary may induce a higher level of technical or "X-efficiency" in home-owned firms that compete with it, supply it or purchase from it. 1 Statistical research for this paper was supported by National Science Foundation grant GS-3270. I am indebted to Thomas Horst for many helpful suggestions, and to seminar participants at Rutgers, Toronto and Michigan for reactions and comments.2 An important line of theoretical research identifies a possible gain to the nation from monopolistic restriction of the inflow or outflow of foreign investment (Hamada, 1966;Jones, 1967). We shall neglect possible gains from the differential taxation of foreign capital to align the private and social marginal benefits. The empirical relations estimated below, however, are consistent with diminishing marginal benefits that could justify such policy, 176 This content downloaded from 128.153.5.49 on Sat, 21 Sep 2013 08:30:37 AM All use subject to JSTOR Terms and Conditions 1974] MULTINATIONAL FIRMS, COMPETITION AND PRODUCTIVITY 177This could be due to the multi...

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THE ETHICAL PHARMACEUTICAL industry is an important one, not so much for its economic size as for the benefits that it delivers to users of its products. The industry has been transformed structurally since the 1940s from a producer of selected chemicals to a research-oriented sector that makes a major contribution to the technology of health care. I Its very success in generating a stream of new drugs with important therapeutic benefits has involved the industry in intense public policy debates over the financing of the cost of its research, the veracity of claims for its products, the prices charged for them (not to mention who pays those charges), and the socially optimal degree of patent protection. The policies and policy debates bearing on competition in the pharmaceutical industry revolve around two interrelated issues of welfare economics. The first is the trade-off between promoting innovative effort and securing competitive market outcomes. The research-oriented We would like to thank Joshua Angrist, Zvi Griliches, Andrea Shepard, and members of the National Bureau of Economic Research productivity group for helpful comments and discussion; numerous individuals in the industry who generously gave their time to provide us with background information; Denise Neumann for research assistance; and Ann Flack and Claudia Napolilli for their help in preparing this manuscript. Whinston thanks the National Science Foundation for financial support (SES-8921996). 1. Temin (1980, chaps. 1-4).

The Dynamics of Industrial Competition, first published in 1995, describes the internal dynamics of industries using longitudinal data that make it possible to track firms over time. It provides a comprehensive picture of a number of different aspects of firm turnover in North America that arise from the competitive process - the entry and the exit of firms, the growth and decline of incumbent firms, and the merger process. Instantaneous and cumulative measures of market dynamics are provided by examining change in both the short and the long run. Using various measures of firm turnover to proxy the amount of competition, the study examines and contextualizes the relationship between industry performance and the intensity of the competitive process.