Vertical Foreign Direct Investment

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Use the two-country model of vertical FDI we developed in class to answer the following questions. Assume that Oau=5, Oas=1, 0bu=1, Obs=10, wul=10, W,1=20, w,2=2 Ws 2=30, Tb=0.35, and T=0.2. What is the optimal firm structure? Complete Fragmentation O HFDI O Partial Fragmentation ExportSuppose economic development in country 2 increases the unskilled wage rate 2... Wu 4. What is the optimal rm structure? Q Complete Fragmentation Q HFDI Q Partial Fragmentation Q Export 'n_r "I"_ How large does WZU need to be for the firm to prefer exporting to other firms structures