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GTAP Resource #3584

"A world CGE model with multinational firms: MIRAGE MNF version"
by Chappuis, Thomas and Yvan Decreux

This study presents an original modeling of FDI in the world CGE model developed at CEPII nicknamed MIRAGE. Our modeling builds on a worldwide FDI database matching the MIRAGE nomenclature namely in three dimensions (sector, source, destination) also developed at CEPII. On the supply side, production is differentiated according to origins of capital. This enables us to distinguish production made by affiliates of multinationals from production made by local firms. On the demand side, we adopt a different demand structure between industrial goods and services. We follow Petri’s approach (1997) for industrial goods which are first differentiated by their origin of capital and then by their production location. The order of choice is inverted for services since services produced abroad are considered less substitutable with services produced locally (Lee and Van der Mensbrugghe (2001)).

This new modeling – MIRAGE MNF version – is first compared to the version of the model with cross-border investment where multinational firms are not explicitly modeled – MIRAGE Portfolio version. We then compare simulations results of a corporate tax exemption on foreign capital in France and Belgium. For these simulations the elasticity of investment to capital return in the model was chosen to be consistent with empirical estimates of the elasticity of FDI to corporate taxation. A corporate tax exemption on foreign capital appears to be positive in France but negative in Belgium, especially in services where the majority of capital is foreign-owned.

Resource Details (Export Citation) GTAP Keywords
Category: 2011 Conference Paper
Status: Published
By/In: Presented at the 14th Annual Conference on Global Economic Analysis, Venice, Italy
Date: 2011
Created: Chappuis, T. (4/15/2011)
Updated: Chappuis, T. (5/26/2011)
Visits: 2,446
- Foreign direct investment
- Dynamic modeling
- Calibration and parameter estimation
- European Union

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