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Export-Platform Investment with Proximity and Product Differentiation: Empirical Evidence from Port-Level International Trade

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Author Info

  • Yushi Yoshida

    ()
    (Faculty of Economics, Kyushu Sangyo University)

Abstract

Multinational firms engage in foreign direct investments to minimize production costs and trade costs. In stead of making foreign direct investment, a firm may find optimal to produce in a periphery region of home country as an export-platform base to minimize these costs. With over 1,000 products categories of exports for six major Japanese ports, this paper empirically examines exports of sub-regions within a country in a gravity model. We obtained strong evidence that proximity of local ports to foreign market increases local-port exports even when destination is fixed to a single country. More importantly, we found that sensitivity of proximity of ports to foreign markets is more pronounced for an industry with higher Asia-intensity exports and a more product-differentiated industry. We can conclude from our empirical evidences that an industry with these characteristics sets up an export-platform base in peripheral regions of home country to minimize international trade costs.

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File URL: http://www.ip.kyusan-u.ac.jp/keizai-kiyo/dp28.pdf
File Function: First version, 2007Dec
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Bibliographic Info

Paper provided by Kyushu Sangyo University, Faculty of Economics in its series Discussion Papers with number 28.

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Length: 34 pages
Date of creation: Dec 2007
Date of revision:
Handle: RePEc:kyu:dpaper:28

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Related research

Keywords: Agglomeration; Asia-intensity; Differentiated products; Export-platform; Gravity equation; Home-market effect; Port-level international trade;

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  1. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  2. Motta, Massimo & Norman, George, 1996. "Does Economic Integration Cause Foreign Direct Investment?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 757-83, November.
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