A note on firm-productivity and foreign direct investment
AbstractAssuming linear demand and unit transportation cost, Head and Ries (2003, ‘Heterogeneity and the FDI versus export decision of Japanese manufacturers’, Journal of the Japanese and International Economies) conclude that the theoretical prediction of Helpman et al. (2004, ‘Export versus FDI with heterogeneous firms’, The American Economic Review), which show that the more productive firms undertake FDI and the less productive firms export, does not depend on their assumptions of CES preferences and iceberg transportation costs. Considering iceberg transportation costs in an otherwise similar setup of Head and Ries (2003), we show that the theoretical prediction of Helpman et al. (2004) may not hold. Hence, CES preference in Helpman et al. (2004) is important for their theoretical results.
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Bibliographic InfoPaper provided by University of Nottingham, School of Economics in its series Discussion Papers with number 10/02.
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Firm-productivity; Foreign direct investment; Iceberg cost;
Other versions of this item:
- Arijit Mukherjee, 2010. "A note on firm-productivity and foreign direct investment," Economics Bulletin, AccessEcon, vol. 30(3), pages 2107-2111.
- F1 - International Economics - - Trade
- F2 - International Economics - - International Factor Movements and International Business
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.:
- Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004.
"Export Versus FDI with Heterogeneous Firms,"
American Economic Review,
American Economic Association, vol. 94(1), pages 300-316, March.
- Arijit Mukherjee & Sugata Marjit, 2009. "Firm productivity and foreign direct investment: a non-monotonic relationship," Economics Bulletin, AccessEcon, vol. 29(1), pages 230-237.
- Keith Head & John Ries, 2003.
"Heterogeneity and the FDI versus Export Decision of Japanese Manufacturers,"
NBER Working Papers
10052, National Bureau of Economic Research, Inc.
- Head, Keith & Ries, John, 2003. "Heterogeneity and the FDI versus export decision of Japanese manufacturers," Journal of the Japanese and International Economies, Elsevier, vol. 17(4), pages 448-467, December.
- Jože P. Damijan & Sašo Polanec & Janez Prašnikar, 2007. "Outward FDI and Productivity: Micro-evidence from Slovenia," The World Economy, Wiley Blackwell, vol. 30(1), pages 135-155, 01.
- Sourafel Girma & Richard Kneller & Mauro Pisu, 2005. "Exports versus FDI: An Empirical Test," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 141(2), pages 193-218, July.
- David Greenaway & Richard Kneller, 2007. "Firm heterogeneity, exporting and foreign direct investment," Economic Journal, Royal Economic Society, vol. 117(517), pages F134-F161, 02.
- Sugata Marjit & Toru Kikuchi, 2011. "Time Zones and FDI with Heterogenous Firms," Discussion Papers Series 425, School of Economics, University of Queensland, Australia.
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