The multinationalization of the transport sector

According to the World Investment Report 2004, the structure of foreign direct investment (FDI) has shifted towards services. Further, the composition of services FDI is also changing from trade and finance to such industries as electricity, water, telecommunications, storage, and transportation. In the latter sector, the value of FDI stock rose by 1600% between 1990 and 2002. Incorporating a transport sector that is dominated by multinationals and economies of scale in a new trade theory model leads to interesting predictions regarding the volume of trade and income and, hence, to a new set of policy conclusions. It also sheds new light on the de-industrialization debate.