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Foreign Direct Investment and Host-Country Trading Blocs

Author

Listed:
  • Heinrich, Jeff

    (University of Wisconsin-Whitewater)

  • Eby Konan, Denise

    (University of Hawaii)

Abstract

We consider the impact of preferential trade agreements (PTAs) on horizontal foreign direct investment (FDI) coming from parent countries outside the PTA. While easier access to a larger market due to a PTA may justify new FDI, preexisting investments may be rationalized as firms concentrate production in a single plant in the PTA. Which effect dominates depends on the extent of pre-PTA tariff jumping. The number of firms in the industry and non-PTA welfare may rise or fall. PTA welfare increases regardless of PTA-induced changes in inward FDI.

Suggested Citation

  • Heinrich, Jeff & Eby Konan, Denise, 2000. "Foreign Direct Investment and Host-Country Trading Blocs," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 15, pages 565-584.
    • Handle: RePEc:ris:integr:0146
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    Citations

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    Cited by:

    1. Çaglar Özden & Francisco J. Parodi, 2004. "Customs Unions And Foreign Investment: Theory And Evidence From Mercosur’s Auto Industry," Working Papers Central Bank of Chile 282, Central Bank of Chile.
    2. Li, Qiaomin & Scollay, Robert & Maani, Sholeh, 2016. "Effects on China and ASEAN of the ASEAN-China FTA: The FDI perspective," Journal of Asian Economics, Elsevier, vol. 44(C), pages 1-19.
    3. Denise Eby KONAN & Jeff HEINRICH, 2009. "Regional Integration and the (Re)distribution of Foreign Investment between Asymmetric Hosts," EcoMod2009 21500054, EcoMod.
    4. Denise Eby Konan & Jeff Heinrich, 2008. "Regional Integration and the (Re)Distrubtion of Foreign Direct Investment between Asymmetric Hosts," DEGIT Conference Papers c013_002, DEGIT, Dynamics, Economic Growth, and International Trade.

    More about this item

    Keywords

    Multinational Enterprise; Foreign Direct Investment; Regional Integration; Preferential Trade Agreements;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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