Boomerang Effect of FDI
AbstractThis article develops a duopoly model (one home and one foreign firms) of FDI examining whether the boomerang effect exists and what determines it. We show that for a given cost disadvantage to the home firm there is a range of of shipping costs with which the home firm chooses to be a multinational enterprise (MNE) performing FDI rather than to export its products, and that cost parameters, especially plant-specific fixed cost, and demand parameter affect the range of the shipping cost inducing FDI. We also show that the boomerang effect exists when the home firm reversely imports its products from the foreign country for sales in the home market. Our welfare analysis show that the existence of boomerang effect does not necessarily deteriorate the welfare of the home country, suggesting the firms of a industry facing intensified import competition to conduct more FDI as a policy implication, depending on the shipping cost. Trade liberalization in the foreign country has different effects on the home firm's incentive for FDI
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoPaper provided by Econometric Society in its series Econometric Society 2004 Far Eastern Meetings with number 674.
Date of creation: 11 Aug 2004
Date of revision:
Contact details of provider:
Phone: 1 212 998 3820
Fax: 1 212 995 4487
Web page: http://www.econometricsociety.org/pastmeetings.asp
More information through EDIRC
Boomerang effect; FDI; Reverse Imports;
Find related papers by JEL classification:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- O29 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Other
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statistics
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.