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FDI vs. Exports: Accounting for Differences in Export-Sales Intensities

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  • Miguel Ricaurte
  • Katherine Schmeiser

Abstract

Industry level data shows striking differences among sectors in ratios of exports to FDI sales. We determine what is needed to endogenously generate this pattern of export and FDI sales. By calibrating a model of monopolistic competitive firms, we find that tradability of goods is not enough to capture the observed sectoral differences, as is commonly assumed. We explore variants of the model and show that sector-specific taxes on multinationals and home bias allow us to replicate these differences.

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Bibliographic Info

Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 523.

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Date of creation: Aug 2009
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Handle: RePEc:chb:bcchwp:523

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  1. Yeaple, Stephen & Helpman, Elhanan & Melitz, Marc, 2004. "Export versus FDI with Heterogeneous Firms," Scholarly Articles 3229098, Harvard University Department of Economics.
  2. Bruce A. Blonigen, 1999. "In Search of Substitution Between Foreign Production and Exports," NBER Working Papers 7154, National Bureau of Economic Research, Inc.
  3. Dunning, John H, 1973. "The Determinants of International Production," Oxford Economic Papers, Oxford University Press, vol. 25(3), pages 289-336, November.
  4. Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 451-71, June.
  5. Mark J. Melitz, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," NBER Working Papers 8881, National Bureau of Economic Research, Inc.
  6. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
  7. Costas Arkolakis, 2008. "Market Penetration Costs and the New Consumers Margin in International Trade," NBER Working Papers 14214, National Bureau of Economic Research, Inc.
  8. Andres Rodriguez-Clare & Laura Alfaro, 2004. "Multinationals and Linkages: An Empirical Investigation," 2004 Meeting Papers 145, Society for Economic Dynamics.
  9. 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.
  10. Sebnem Kalemli-Ozcan & Laura Alfaro & Selin Sayek & Areendam Chanda, 2002. "FDI and Economic Growth: The Role of Local Financial Markets," Macroeconomics 0212007, EconWPA.
  11. Nocke, Volker & Yeaple, Stephen, 2007. "Cross-border mergers and acquisitions vs. greenfield foreign direct investment: The role of firm heterogeneity," Journal of International Economics, Elsevier, vol. 72(2), pages 336-365, July.
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