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Protectionist Threats And Foreign Direct Investment

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Author Info
Bruce A. Blonigen
Robert C. Feenstra

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Abstract

The recent literature on quid pro quo foreign direct investment (FDI) suggests that FDI may be induced by the threat of protection, and further, that FDI may be used as an instrument to defuse a protectionist threat. This paper uses a panel data set of 4-digit SIC level observations of Japanese manufacturing FDI into the United States in the 1980s to explore these hypotheses empirically. We find strong statistical support for the hypothesis that higher threats of protection lead to greater FDI flows, and post-regression simulations find that a rise in the expected probability of protection from five to ten percent means over a 30 percent rise in next-period FDI flows for an average industry. In addition, there is evidence that non-acquisition FDI by the Japanese had success in defusing the threat of an escape clause investigation in future periods.

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Paper provided by California Davis - Department of Economics in its series Department of Economics with number 96-01.

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Handle: RePEc:fth:caldec:96-01

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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.:
  1. Moore, Michael O, 1992. "Rules or Politics? An Empirical Analysis of ITC Anti-dumping Decisions," Economic Inquiry, Oxford University Press, vol. 30(3), pages 449-66, July.
  2. Robert Baldwin & Jeffrey Steagall, 1994. "An analysis of ITC decisions in antidumping, countervailing duty and safeguard cases," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 130(2), pages 290-308, June. [Downloadable!] (restricted)
  3. Goldberger, Arthur S, 1972. "Maximum-Likelihood Estimation of Regressions Containing Unobservable Independent Variables," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(1), pages 1-15, February. [Downloadable!] (restricted)
  4. Wendy L. Hansen & Thomas J. Prusa, 1996. "Cumulation and ITC Decision-Making: The Sum of the Parts is Greater Than the Whole," Departmental Working Papers 199422, Rutgers University, Department of Economics.
  5. Robert Staiger & Frank Wolak, 1994. "Measuring Industry Specific Protection: Antidumping in the United States," International Trade 9410004, EconWPA. [Downloadable!]
    Other versions:
  6. Trefler, Daniel, 1993. "Trade Liberalization and the Theory of Endogenous Protection: An Econometric Study of U.S. Import Policy," Journal of Political Economy, University of Chicago Press, vol. 101(1), pages 138-60, February. [Downloadable!] (restricted)
  7. Martin, Stephen, 1991. "Direct foreign investment in the United States," Journal of Economic Behavior & Organization, Elsevier, vol. 16(3), pages 283-293, December. [Downloadable!] (restricted)
  8. Gene Grossman & Elhanan Helpman, 1994. "Foreign Investment with Endogenous Protection," NBER Working Papers 4876, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Dinopoulos, E. & Wong, K-Y., 1990. "Quid Pro Quo Foreign Investment And Policy Intervention," Discussion Papers in Economics at the University of Washington 90-14, Department of Economics at the University of Washington.
  10. Coughlin, Cletus C & Terza, Joseph V & Khalifah, Noor Aini, 1989. "The Determinants of Escape Clause Petitions," The Review of Economics and Statistics, MIT Press, vol. 71(2), pages 341-47, May. [Downloadable!] (restricted)
  11. Froot, Kenneth A & Stein, Jeremy C, 1991. "Exchange Rates and Foreign Direct Investment: An Imperfect Capital Markets Approach," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1191-217, November. [Downloadable!] (restricted)
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  12. Salvatore, Dominick, 1987. "Import penetration, exchange rates, and protectionism in the United States," Journal of Policy Modeling, Elsevier, vol. 9(1), pages 125-141. [Downloadable!] (restricted)
  13. Azrak, Paul & Wynne, Kevin, 1995. "Protectionism and Japanese direct investment in the United States," Journal of Policy Modeling, Elsevier, vol. 17(3), pages 293-305, June. [Downloadable!] (restricted)
  14. Robert Z. Lawrence, 1991. "Efficient or Exclusionist: The Import Behavior of Japanese Corporate Groups," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1991-1), pages 311-341. [Downloadable!]
  15. Finger, J M & Hall, H Keith & Nelson, Douglas R, 1982. "The Political Economy of Administered Protection," American Economic Review, American Economic Association, vol. 72(3), pages 452-66, June. [Downloadable!] (restricted)
  16. Hansen, Wendy L & Prusa, Thomas J, 1996. "Cumulation and ITC Decision-Making: The Sum of the Parts Is Greater Than the Whole," Economic Inquiry, Oxford University Press, vol. 34(4), pages 746-69, October.
  17. Bhagwati, Jagdish N & Dinopoulos, Elias & Wong, Kar-yiu, 1992. "Quid Pro Quo Foreign Investment," American Economic Review, American Economic Association, vol. 82(2), pages 186-90, May. [Downloadable!] (restricted)
  18. Takacs, Wendy E, 1981. "Pressures for Protectionism: An Empirical Analysis," Economic Inquiry, Oxford University Press, vol. 19(4), pages 687-93, October.
  19. Grubaugh, Stephen G, 1987. "Determinants of Direct Foreign Investment," The Review of Economics and Statistics, MIT Press, vol. 69(1), pages 149-52, February. [Downloadable!] (restricted)
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(explanations, 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.)

  1. Bruce A. Blonigen & KaSaundra Tomlin & Wesley W. Wilson, 2002. "Tariff-jumping FDI and Domestic Firms' Profits," NBER Working Papers 9027, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Bruce A. Blonigen & KaSaundra Tomlin & Wesley W. Wilson, 2001. "Tariff-jumping FDI and Domestic Firms’ Profits," University of Oregon Economics Department Working Papers 2002-5, University of Oregon Economics Department, revised 01 Jun 2002. [Downloadable!]
  3. Grether, Jean-Marie & de Melo, Jaime & Olarreaga, Marcelo, 1999. "Who determines Mexican trade policy?," Policy Research Working Paper Series 2187, The World Bank. [Downloadable!]
    Other versions:
  4. Laura Resmini, 1999. "The Determinants of Foreign Direct Investment into the CEECs: New Evidence from Sectoral Patterns," LICOS Discussion Papers 8399, LICOS - Centre for Institutions and Economic Performance, K.U.Leuven. [Downloadable!]
    Other versions:
  5. Bruce A. Blonigen, 2000. "Tariff-Jumping Antidumping Duties," NBER Working Papers 7776, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Bruce A. Blonigen & Stephen E. Haynes, 2002. "Antidumping Investigations and the Pass-Through of Antidumping Duties and Exchange Rates," American Economic Review, American Economic Association, vol. 92(4), pages 1044-1061, September. [Downloadable!] (restricted)
  7. Bruce A. Blonigen & Stephen E. Haynes, 1999. "Antidumping Investigations and the Pass-Through of Exchange Rates and Antidumping Duties," NBER Working Papers 7378, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Bruce A. Blonigen & KaSaundra Tomlin & Wesley W. Wilson, 2002. "Tariff-jumping FDI and Domestic Firms’ Profits," University of Oregon Economics Department Working Papers 2003-23, University of Oregon Economics Department, revised 01 Jun 2002. [Downloadable!]
  9. Bruce A. Blonigen & Christopher J. Ellis & Dietrich Fausten, 2000. "Industrial Groupings and Strategic FDI: Theory and Evidence," NBER Working Papers 8046, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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