FDI versus Exports: Multiple Host Countries and Empirical Evidence
AbstractThere are two main options for companies to serve foreign markets: exports and foreign direct investment (FDI). Based on the Helpman, Melitz and Yeaple (2004) model for multiple host countries this paper derives a clear theoretical prediction for the decision between both strategies. A bivariate probit model is estimated using a large data set of European companies to analyze the probability of using one or the other strategy. The empirical evidence indicates that more productive firms less (more) probably use the export (FDI) strategy to serve foreign markets. Moreover, a considerable number of companies use a combination of both strategies to serve foreign markets, which is in line with a multiple country model.
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Bibliographic InfoPaper provided by University of Salzburg in its series Working Papers in Economics and Finance with number 2011-3.
Length: 19 pages
Date of creation: 17 Feb 2011
Date of revision:
Heterogeneous Firms; Exports; Foreign Direct Investment; Multiple Host Countries; Bivariate Probit Estimation;
Other versions of this item:
- Harald Oberhofer & Michael Pfaffermayr, 2012. "FDI versus Exports: Multiple Host Countries and Empirical Evidence," The World Economy, Wiley Blackwell, vol. 35(3), pages 316-330, 03.
- C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
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- Filomena Pietrovito & Alberto Franco Pozzolo & Luca Salvatici, 2013.
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