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Relative factor abundance and FDI factor intensity in developed countries

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  • Alfons Palangkaraya
  • Andreas Waldkirch

Abstract

This study looks at the link between the patterns of trade-revealed comparative advantage and net inward foreign direct investment in five developed countries: the United Kingdom, the United States, Japan, France, and Italy. It thus extends earlier work by Maskus and Webster (1995) who analyzed two countries, the United Kingdom and South Korea. Despite assertions in the literature that market access is the primary motive for foreign direct investment flows among developed countries, this study shows that there is a significant role for comparative advantage in determining inflows of foreign direct investment in developed countries, especially in the services industry.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal International Economic Journal.

Volume (Year): 22 (2008)
Issue (Month): 4 ()
Pages: 489-508

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Handle: RePEc:taf:intecj:v:22:y:2008:i:4:p:489-508

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Keywords: foreign direct investment; comparative advantage; Heckscher-Ohlin-Vanek;

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References

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  1. Bayoumi, Tamim & Lipworth, Gabrielle, 1998. "Japanese foreign direct investment and regional trade," Journal of Asian Economics, Elsevier, vol. 9(4), pages 581-607.
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  8. Wheeler, David & Mody, Ashoka, 1992. "International investment location decisions : The case of U.S. firms," Journal of International Economics, Elsevier, vol. 33(1-2), pages 57-76, August.
  9. Cörvers,F. & Reininga,T., 1998. "The Dutch Factor Content of Human and Physical Capital: A Test of the HOV Model," ROA Research Memorandum 001, Maastricht University, Research Centre for Education and the Labour Market (ROA).
  10. Blonigen, Bruce A, 1997. "Firm-Specific Assets and the Link between Exchange Rates and Foreign Direct Investment," American Economic Review, American Economic Association, vol. 87(3), pages 447-65, June.
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  12. Robert E. Lipsey, 2000. "Interpreting Developed Countries' Foreign Direct Investment," NBER Working Papers 7810, National Bureau of Economic Research, Inc.
  13. Markusen, James R., 1984. "Multinationals, multi-plant economies, and the gains from trade," Journal of International Economics, Elsevier, vol. 16(3-4), pages 205-226, May.
  14. L. Nachum & J. H. Dunning & G. G. Jones, 2000. "UK FDI and the Comparative Advantage of the UK," The World Economy, Wiley Blackwell, vol. 23(5), pages 701-720, 05.
  15. James R. Markusen, 1997. "Trade versus Investment Liberalization," NBER Working Papers 6231, National Bureau of Economic Research, Inc.
  16. Stephen Ross Yeaple, 2003. "The Role of Skill Endowments in the Structure of U.S. Outward Foreign Direct Investment," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 726-734, August.
  17. Braconier, Henrik & Norbäck, Pehr-Johan & Urban, Dieter, 2002. "Vertical FDI Revisited," Working Paper Series 579, Research Institute of Industrial Economics.
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