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The firm export and FDI choice in the context of gravity

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  • Schmeiser, Katherine N.

Abstract

In this paper, I show that in a theoretical environment where monopolistic competitive firms choose between exporting and servicing through a multinational with foreign direct investment (FDI), a gravity representation of exports and FDI can be derived. I then discuss the extent to which the resulting gravity equations are comparable and suggest a gravity-type regression that allows for direct interpretation of the differential effects of variables on exports and FDI.

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Bibliographic Info

Article provided by Elsevier in its journal International Review of Economics & Finance.

Volume (Year): 27 (2013)
Issue (Month): C ()
Pages: 592-596

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Handle: RePEc:eee:reveco:v:27:y:2013:i:c:p:592-596

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Web page: http://www.elsevier.com/locate/inca/620165

Related research

Keywords: Trade; Gravity; FDI; Monopolistic competition;

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References

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  1. Bruce A. Blonigen, 1999. "In Search of Substitution Between Foreign Production and Exports," NBER Working Papers 7154, National Bureau of Economic Research, Inc.
  2. Toubal, Farid & Kleinert, Jörn & Buch, Claudia M., 2003. "Determinants of German FDI: New Evidence from Micro-Data," Discussion Paper Series 1: Economic Studies 2003,09, Deutsche Bundesbank, Research Centre.
  3. Brenton, Paul & DiMauro, Francesca & Lücke, Matthias, 1998. "Economic integration and FDI: an empirical analysis of foreign investment in the EU and in Central and Eastern Europe," Kiel Working Papers 890, Kiel Institute for the World Economy.
  4. Jörn Kleinert & Farid Toubal, 2010. "Gravity for FDI," Review of International Economics, Wiley Blackwell, vol. 18(1), pages 1-13, 02.
  5. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
  6. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, vol. 98(4), pages 1707-21, September.
  7. James E. Anderson & Eric van Wincoop, 2000. "Gravity with Gravitas: A Solution to the Border Puzzle," Boston College Working Papers in Economics 485, Boston College Department of Economics.
  8. Michael P. Keane & Susan E. Feinberg, 2006. "Accounting for the Growth of MNC-Based Trade Using a Structural Model of U.S. MNCs," American Economic Review, American Economic Association, vol. 96(5), pages 1515-1558, December.
  9. Andrew B. Bernard & J. Bradford Jensen & Peter K. Schott, 2005. "Importers, Exporters, and Multinationals: A Portrait of Firms in the U.S. that Trade Goods," NBER Working Papers 11404, National Bureau of Economic Research, Inc.
  10. Peter Egger & Michael Pfaffermayr, 2001. "Distance, Trade and FDI: A Hausman-Taylor SUR Approach," WIFO Working Papers 164, WIFO.
  11. Schmeiser, Katherine N. & Ricaurte, Miguel F., 2012. "Tradability and market penetration costs: Explaining foreign market servicing intensities," International Review of Economics & Finance, Elsevier, vol. 22(1), pages 190-200.
  12. Stephen Ross Yeaple, 2006. "Offshoring, Foreign Direct Investment, and the Structure of U.S. Trade," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 602-611, 04-05.
  13. Gleason, Kimberly C. & Lee, Chun I & Mathur, Ike, 2002. "Dimensions of international expansions by US firms to China: Wealth effects, mode selection, and firm-specific factors," International Review of Economics & Finance, Elsevier, vol. 11(2), pages 139-154, May.
  14. Timo Mitze & Alecke Bjorn & Untiedt Gerhard, 2010. "Trade-FDI Linkages in a Simultaneous Equations System of Gravity Models for German Regional Data," Economie Internationale, CEPII research center, issue 122, pages 121-162.
  15. Oldenski, Lindsay, 2012. "Export Versus FDI and the Communication of Complex Information," Journal of International Economics, Elsevier, vol. 87(2), pages 312-322.
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Cited by:
  1. Bahmani-Oskooee, Mohsen & Harvey, Hanafiah & Hegerty, Scott W., 2014. "Industry trade and exchange-rate fluctuations: Evidence from the U.S. and Chile," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 619-626.

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