International Trade and Factor Mobility: An Empirical Investigation
AbstractForeign Direct Investment (FDI) has been growing rapidly, at a pace far exceeding the growth in international trade. Thus, a full understanding of the relationship between trade in goods and FDI is important for obtaining a complete picture of the extent and sources of international linkages. We investigate whether FDI serves as a complement to trade or a substitute for trade based on the effects identified by the Rybczynski theorem whereby an increase in a factor of production used intensively in one sector affects production both in that sector and in other sectors. Using detailed data on bilateral capital and trade flows between the United States and individual Latin American countries, we examine the linkages between FDI into particular sectors of Latin American economies and the net exports of those and other manufacturing sectors. We find that FDI from the United States can lead to significant, and varied, shifts in the composition of activity in many Latin American countries and across many manufacturing industries.
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Date of creation: Jun 1999
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- Linda S. Goldberg & Michael W. Klein, 1999. "International trade and factor mobility: an empirical investigation," Staff Reports 81, Federal Reserve Bank of New York.
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F3 - International Economics - - International Finance
This paper has been announced in the following NEP Reports:
- NEP-ALL-1999-07-28 (All new papers)
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