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The Economics Of Foreign Direct Investment And Trade With An Application To The U.S. Food Processing Industry

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  • Gopinath, Munisamy
  • Pick, Daniel H.
  • Vasavada, Utpal

Abstract

This paper investigates the determinants of foreign direct investment (FDI) and its relationship to trade in the U.S. food processing industry. A representative multinational corporation maximizes profits by choosing between production in the home country, which is exported, and production in a foreign country. This introduces the possibility that foreign affiliate sales can be a substitute and/or complement for exports. The empirical framework consists of a system of four equations with foreign affiliate sales, exports, affiliate employment, and FDI as endogenous variables. The results confirm a small substitution between foreign affiliate sales and exports. The empirical evidence supports the hypothesis that FDI is also protection-jumping.

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Bibliographic Info

Paper provided by International Agricultural Trade Research Consortium in its series Working Papers with number 51205.

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Date of creation: 1998
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Handle: RePEc:ags:iatrwp:51205

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Keywords: Agribusiness; International Relations/Trade;

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Cited by:
  1. Plummer, Charles & Makki, Shiva S., 2004. "Globalization Of The Frozen Potato Industry," 2004 Annual meeting, August 1-4, Denver, CO 19950, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  2. Carter, Colin A. & Yilmaz, Alper, 1999. "Foreign Direct Investment (Fdi) And Trade - Substitutes And Complements? An Application To The Processed Food Industry," 1999 Annual meeting, August 8-11, Nashville, TN 21665, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  3. Buccola, Steven T. & Durham, Catherine A. & Gopinath, Munisamy & Henderson, Erin, 2001. "Food Manufacturing Cooperatives' Overseas Business Portfolios," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, Western Agricultural Economics Association, vol. 26(01), July.
  4. Garcia-Fuentes, Pablo A. & Kennedy, P. Lynn & Ferreira, Gustavo F.C., 2013. "U.S. Foreign Direct Investment in Latin America and the Caribbean: A case of Remittances and Market Size," 2013 Annual Meeting, February 2-5, 2013, Orlando, Florida, Southern Agricultural Economics Association 142985, Southern Agricultural Economics Association.
  5. Luljeta Hajderllari & Kostas Karantininis & Lartey G. Lawson, 2012. "FDI as an Export-Platform: A Gravity Model for the Danish Agri-Food Industry," IFRO Working Paper 2012/7, University of Copenhagen, Department of Food and Resource Economics.
  6. Cai, Xiaowei & Stiegert, Kyle W., 2012. "Modal FDI Strategies in Asia-Pacific Region," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IAMA), International Food and Agribusiness Management Association (IAMA), vol. 15(2).
  7. Peter Walkenhorst;, 2001. "Determinants of foreign direct investment in the food industry: The case of Poland," Agribusiness, John Wiley & Sons, Ltd., vol. 17(3), pages 383-395.
  8. Reed, Michael R. & Babool, Md. Ashfaqul Islam, 2003. "Factors Affecting International Mergers and Acquisitions," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IAMA), International Food and Agribusiness Management Association (IAMA), vol. 6(04).
  9. Steven C. Blank, 2002. "A Portfolio Of Threats To American Agriculture," Contemporary Economic Policy, Western Economic Association International, vol. 20(4), pages 381-393, October.
  10. Doan, Darcie & Goldstein, Andrew & Zahniser, Steven & Vollrath, Thomas L. & Bolling, H. Christine, 2004. "North American Integration In Agriculture: A Survey Paper," North American Agrifood Integration: Situation and Perspectives, May 2004, Cancun, Mexico 16730, Farm Foundation.
  11. Somwaru, Agapi & Bolling, H. Christine, 1999. "U.S. Foreign Direct Investment And Trade: Substitutes Or Complements? The Case Of The Food Processing Industry," 1999 Annual meeting, August 8-11, Nashville, TN 21715, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  12. Mattson, Jeremy W. & Koo, Won W., 2002. "U.S. Processed Food Exports And Foreign Direct Investment In The Western Hemisphere," Agribusiness & Applied Economics Report, North Dakota State University, Department of Agribusiness and Applied Economics 23547, North Dakota State University, Department of Agribusiness and Applied Economics.
  13. Marchant, Mary A. & Saghaian, Sayed H. & Vickner, Steven S., 1999. "Trade And Foreign Direct Investment Management Strategies For U.S. Processed Food Firms In China," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IAMA), International Food and Agribusiness Management Association (IAMA), vol. 2(02).
  14. Makki, Shiva S. & Somwaru, Agapi & Bolling, H. Christine, 2004. "Determinants of Foreign Direct Investment in the Food-Processing Industry: A Comparative Analysis of Developed and Developing Economies," Journal of Food Distribution Research, Food Distribution Research Society, Food Distribution Research Society, vol. 35(03), November.
  15. Makki, Shiva S. & Somwaru, Agapi & Bolling, H. Christine, 2003. "Determinants Of U.S. Foreign Direct Investments In Food Processing Industry: Evidence From Developed And Developing Countries," 2003 Annual meeting, July 27-30, Montreal, Canada 22035, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  16. Wilson, Norbert L.W., 2006. "Linkages amongst Foreign Direct Investment, Trade and Trade Policy: An Economic Analysis with Applications to the Food Sector," 2006 Annual meeting, July 23-26, Long Beach, CA 21064, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  17. Hajderllari, Luljeta & Karantininis, Kostas & Lawson, Lartey Godwin, 2011. "Gravity model of outward FDI and trade in Agri-food in Denmark," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland, European Association of Agricultural Economists 114771, European Association of Agricultural Economists.
  18. Liu, Xiaming & Wang, Chengang & Wei, Yingqi, 2001. "Causal links between foreign direct investment and trade in China," China Economic Review, Elsevier, vol. 12(2-3), pages 190-202.

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