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Reform Creating Regional Trade Agreements And Foreign Direct Investment: Applications For East Asia

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  • Innwon Park
  • Soonchan Park

Abstract

We estimate the investment creation and diversion effects of RTAs by using an extended gravity equation focusing on domestic reform as a commitment device for RTA membership. As a case study, we estimate the impact of proposed East Asian RTAs on inward FDI. We find that: (i) reform creating RTA membership, larger market size, better skilled labour and lower trade costs all contribute positively and significantly to inward FDI; and (ii) most of the proposed East Asian RTAs promote intra-bloc FDI. In particular, both South-North and North-North RTAs prove to be more preferable membership combinations to South-South RTAs in East Asia. Copyright 2008 The Authors. Journal compilation 2008 Blackwell Publishing Asia Pty Ltd

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Pacific Economic Review.

Volume (Year): 13 (2008)
Issue (Month): 5 (December)
Pages: 550-566

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Handle: RePEc:bla:pacecr:v:13:y:2008:i:5:p:550-566

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Cited by:
  1. Philippa Dee & Anne McNaughton, 2011. "Promoting Domestic Reforms through Regionalism," Governance Working Papers 23224, East Asian Bureau of Economic Research.
  2. Waldkirch, Andreas & Tekin-Koru, Ayca, 2010. "North American Integration and Canadian Foreign Direct Investment," MPRA Paper 21482, University Library of Munich, Germany.
  3. Verico, Kiki, 2012. "The Impact of Intra Regional Trade Agreement on FDI Inflows in Southeast Asia: Case of Indonesia, Malaysia and Thailand," MPRA Paper 42087, University Library of Munich, Germany, revised 20 Oct 2012.
  4. Shawn ARITA & TANAKA Kiyoyasu, 2013. "Regional Investment Liberalization and FDI," Discussion papers 13088, Research Institute of Economy, Trade and Industry (RIETI).

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