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Investment Liberalization and International Trade

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  • Amiti, Mary
  • Wakelin, Katharine

Abstract

This Paper estimates the cross-price elasticity of exports with respect to investment costs for bilateral relations between 36 countries. We show that the effect of reducing foreign direct investment costs on exports depends on country characteristics and trade costs as predicted by the Markusen (1997, 2002) model. When countries differ in relative factor endowments and trade costs are low, investment liberalization stimulates exports, whereas when countries are similar in terms of relative factor endowments and size, and trade costs are moderate to high, investment liberalization reduces exports.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3492.

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Date of creation: Aug 2002
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Handle: RePEc:cpr:ceprdp:3492

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Keywords: exports; foreign direct investment; international trade; investment costs; investment liberalization;

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References

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Citations

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Cited by:
  1. Baltagi, Badi H. & Egger, Peter & Pfaffermayr, Michael, 2007. "Estimating models of complex FDI: Are there third-country effects?," Journal of Econometrics, Elsevier, vol. 140(1), pages 260-281, September.
  2. Anwar, Sajid & Nguyen, Lan Phi, 2011. "Foreign direct investment and trade: The case of Vietnam," Research in International Business and Finance, Elsevier, vol. 25(1), pages 39-52, January.
  3. Carolina Lennon, 2009. "Trade in Services: Cross-Border Trade vs. Commercial Presence. Evidence of Complementarity," wiiw Working Papers 59, The Vienna Institute for International Economic Studies, wiiw.
  4. Angelo Antoci & Paolo Russu & Elisa Ticci, 2013. "Investment inflows and sustainable development in a natural resource-dependent economy," Department of Economics University of Siena 670, Department of Economics, University of Siena.
  5. repec:hal:wpaper:halshs-00586217 is not listed on IDEAS
  6. Artjoms IVLEVS & Jaime DE MELO, 2010. "FDI, the Brain Drain and Trade: Channels and Evidence," Annales d'Economie et de Statistique, ENSAE, issue 97-98, pages 103-121.
  7. Egger, Hartmut & Egger, Peter & Greenaway, David, 2007. "Intra-industry trade with multinational firms," European Economic Review, Elsevier, vol. 51(8), pages 1959-1984, November.
  8. Donny Tang, 2005. "Effects of the Regional Trading Arrangements on Trade: Evidence from the NAFTA, ANZCER and ASEAN Countries, 1989 - 2000," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 14(2), pages 241-265.
  9. Hsu, Chih-Chiang & Wu, Jyun-Yi & Yau, Ruey, 2011. "Foreign direct investment and business cycle co-movements: The panel data evidence," Journal of Macroeconomics, Elsevier, vol. 33(4), pages 770-783.
  10. Holger Görg, 2003. "Foreign direct investment, investment incentives, and firing costs: A disadvantage for "inflexible Europe"?," European Economy Group Working Papers 30, European Economy Group.
  11. Iwasa, Kazumichi & Kikuchi, Toru, 2007. "Strategic Divisionalization, Product Differentiation and International Competition," MPRA Paper 5120, University Library of Munich, Germany.
  12. Gerda Dewit & Holger Görg & Yama Temouri, 2013. "Employment Protection and Relocation with Firm Heterogeneity," Economics, Finance and Accounting Department Working Paper Series n234-13.pdf, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.

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