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Investment liberalization and international trade

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  • Amiti, Mary
  • Wakelin, Katharine

Abstract

This Paper estimates the cross-price elasticity of exports with respect to investment costs for bilateral relations between 36 countries. We show that the effect of reducing foreign direct investment costs on exports depends on country characteristics and trade costs as predicted by the Markusen (1997, 2002) model. When countries differ in relative factor endowments and trade costs are low, investment liberalization stimulates exports, whereas when countries are similar in terms of relative factor endowments and size, and trade costs are moderate to high, investment liberalization reduces exports.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 61 (2003)
Issue (Month): 1 (October)
Pages: 101-126

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Handle: RePEc:eee:inecon:v:61:y:2003:i:1:p:101-126

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Web page: http://www.elsevier.com/locate/inca/505552

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Citations

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Cited by:
  1. repec:hal:wpaper:halshs-00586217 is not listed on IDEAS
  2. Baltagi, Badi H. & Egger, Peter & Pfaffermayr, Michael, 2007. "Estimating models of complex FDI: Are there third-country effects?," Journal of Econometrics, Elsevier, Elsevier, vol. 140(1), pages 260-281, September.
  3. Holger Görg, 2003. "Foreign direct investment, investment incentives, and firing costs: A disadvantage for "inflexible Europe"?," European Economy Group Working Papers, European Economy Group 30, European Economy Group.
  4. Donny Tang, 2005. "Effects of the Regional Trading Arrangements on Trade: Evidence from the NAFTA, ANZCER and ASEAN Countries, 1989 - 2000," The Journal of International Trade & Economic Development, Taylor & Francis Journals, Taylor & Francis Journals, vol. 14(2), pages 241-265.
  5. Hsu, Chih-Chiang & Wu, Jyun-Yi & Yau, Ruey, 2011. "Foreign direct investment and business cycle co-movements: The panel data evidence," Journal of Macroeconomics, Elsevier, Elsevier, vol. 33(4), pages 770-783.
  6. Artjoms Ivlevs & Jaime de Melo, . "FDI, the Brain Drain and Trade: Channels and Evidence," Discussion Papers 08/40, University of Nottingham, GEP.
  7. Angelo Antoci & Paolo Russu & Elisa Ticci, 2011. "Investement inflows and sustainable development in a natural resource-dependent economy," Department of Economic Policy, Finance and Development (DEPFID) University of Siena 0311, Department of Economic Policy, Finance and Development (DEPFID), University of Siena.
  8. Iwasa, Kazumichi & Kikuchi, Toru, 2007. "Strategic Divisionalization, Product Differentiation and International Competition," MPRA Paper 5120, University Library of Munich, Germany.
  9. Anwar, Sajid & Nguyen, Lan Phi, 2011. "Foreign direct investment and trade: The case of Vietnam," Research in International Business and Finance, Elsevier, Elsevier, vol. 25(1), pages 39-52, January.
  10. Carolina Lennon, 2009. "Trade in Services: Cross-Border Trade vs. Commercial Presence. Evidence of Complementarity," wiiw Working Papers 59, The Vienna Institute for International Economic Studies, wiiw.
  11. Egger, Hartmut & Egger, Peter & Greenaway, David, 2007. "Intra-industry trade with multinational firms," European Economic Review, Elsevier, vol. 51(8), pages 1959-1984, November.
  12. Gerda Dewit & Holger Görg & Yama Temouri, 2013. "Employment Protection and Relocation with Firm Heterogeneity," Economics, Finance and Accounting Department Working Paper Series, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth n234-13.pdf, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.

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