An Empirical Assessment of a Tradeoff Between FDI and Exports
AbstractThe relation between exports and FDI could be complementary or substitutable depending on the types of FDI. Overseas investment to displace exports must have a substitution relation while FDI for vertical fragmentation between countries would boost the home export. Empirical studies have generally found a positive relation and finding a substitution relation is relatively recent. We investigate the relation between those two variables using detailed information of Korean multinational firms and their foreign affiliates from 1999 to 2004. In so doing, unlike previous studies, we consider the host countrys income level and various activities of each affiliate, whether it serves the host country or exports outside in particular. The complementary relation is found by simply following previous studies. Once we consider the host countrys income level and various activities of each affiliate, however, different results are produced. Our empirical results show substitution if the affiliates are located in a developed country and mainly serve the host country, while complementarity if the affiliates export their products outside of the host country. Moreover, the complementary effect is strengthened if they are located in a less developed country.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by East Asian Bureau of Economic Research in its series Trade Working Papers with number 22009.
Date of creation: Jan 2007
Date of revision:
Contact details of provider:
Postal: JG Crawford Building #13, Asia Pacific School of Economics and Government, Australian National University, ACT 0200
Web page: http://www.eaber.org
More information through EDIRC
Find related papers by JEL classification:
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- F15 - International Economics - - Trade - - - Economic Integration
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bruce A. Blonigen & Ronald B. Davies & Glen R. Waddell & Helen T. Naughton, 2004.
"FDI in Space: Spatial Autoregressive Relationships in Foreign Direct Investment,"
NBER Working Papers
10939, National Bureau of Economic Research, Inc.
- Blonigen, Bruce A. & Davies, Ronald B. & Waddell, Glen R. & Naughton, Helen T., 2007. "FDI in space: Spatial autoregressive relationships in foreign direct investment," European Economic Review, Elsevier, vol. 51(5), pages 1303-1325, July.
- Yeaple, Stephen & Helpman, Elhanan & Melitz, Marc, 2004.
"Export versus FDI with Heterogeneous Firms,"
3229098, Harvard University Department of Economics.
- Badi H. Baltagi & Peter Egger & Michael Pfaffermayr, 2005.
"Estimating Models of Complex FDI: Are There Third-Country Effects?,"
Center for Policy Research Working Papers
73, Center for Policy Research, Maxwell School, Syracuse University.
- 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.
- Yann Duval, 2008. "Trade and Investment Linkages and Policy Coordination: Lessons from Case Studies in Asian Developing Countries," Working Papers 5508, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada..
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shiro Armstrong).
If references are entirely missing, you can add them using this form.