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Some new evidence on intra-industry trade and complex FDI in ASEAN countries: a spatial panel approach

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  • Nathapornpan Piyaareekul Uttama
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    Abstract

    This paper examines the interaction on intra-industry trade (IIT) and foreign direct investment (FDI) with special attention to the Association of Southeast Asian Nations (ASEAN). We introduce the 2×3×3 knowledge-capital model, recently proposed by Baltagi et al. (2007) and Uttama and Péridy (2009). The theoretical implications are suggested, not only how IIT is determined by country characteristics, such as similarity in market size and factor differentials, but also trade costs as well as regional economic integration. Moreover, it also empirically investigates the determinants of aggregated and disaggregated IIT in five ASEAN countries over the period 19952008, concerned with what extent complex FDIs boost IIT. Using spatial panel data model, we find the fact that the empirical results are consistent with the theoretical predictions. Vertical FDI tends to discourage ASEAN’s IIT, whereas complex horizontal FDI in neighbours tends to encourage its IIT in ASEAN.

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    Bibliographic Info

    Article provided by Inderscience Enterprises Ltd in its journal Int. J. of Economics and Business Research.

    Volume (Year): 4 (2012)
    Issue (Month): 1/2 ()
    Pages: 116-131

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    Handle: RePEc:ids:ijecbr:v:4:y:2012:i:1/2:p:116-131

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    Web page: http://www.inderscience.com/browse/index.php?journalID==310

    Related research

    Keywords: foreign direct investment; spatial econometrics; ASEAN; Association of Southeast Asian Nations; Indonesia; Malaysia; Philippines; Singapore; Thailand; spatial panels; knowledge-capital models; Badi Hani Baltagi; Nathapornpan Piyaareekul Uttama; country characteristics; market size; factor differentials; trade costs; economic integration; vertical FDI; complex FDI; horizontal FDI; Nicolas Péridy; economics; business research; intra-industry trade.;

    References

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    1. James R. Markusen, 2004. "Multinational Firms and the Theory of International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633078, December.
    2. José Manuel Martins Caetano & Aurora Galego, 2006. "In Search for Determinants of Intra-Industry Trade within an Enlarged Europe," Economics Working Papers 2_2006, University of Évora, Department of Economics (Portugal).
    3. Sawyer, William C. & Sprinkle, Richard L. & Tochkov, Kiril, 2010. "Patterns and determinants of intra-industry trade in Asia," Journal of Asian Economics, Elsevier, vol. 21(5), pages 485-493, October.
    4. Xing, Yuqing, 2007. "Foreign direct investment and China's bilateral intra-industry trade with Japan and the US," BOFIT Discussion Papers 1/2007, Bank of Finland, Institute for Economies in Transition.
    5. Bernhofen, Daniel M., 1999. "Intra-industry trade and strategic interaction: Theory and evidence," Journal of International Economics, Elsevier, vol. 47(1), pages 225-244, February.
    6. Hartmut Egger & Peter Egger & Michael Ryan, 2010. "Bilateral and Third-Country Exchange Rate Effects on Multinational Activity," Review of International Economics, Wiley Blackwell, vol. 18(5), pages 1012-1027, November.
    7. Wakasugi, R., 1997. "Missing factors of intra-industry trade: Some empirical evidence based on Japan," Japan and the World Economy, Elsevier, vol. 9(3), pages 353-362, August.
    8. Badi H. Baltagi & Peter Egger & Michael Pfaffermayr, 2005. "Estimating Models of Complex FDI: Are There Third-Country Effects?," Center for Policy Research Working Papers 73, Center for Policy Research, Maxwell School, Syracuse University.
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