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Distance, Trade and FDI: A Hausman-Taylor SUR Approach

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Author Info

  • Peter Egger

    (WIFO)

  • Michael Pfaffermayr

    (WIFO)

Abstract

This paper analyses the effects of distance as a common determinant of exports and FDI in a three-factor New Trade Theory model, assuming that distance affects both pure trade costs and plant set-up costs. Exports and FDI are not necessarily substitutes with respect to distance, since the predicted impact depends on its importance for fixed plant set-up costs relative to transportation costs and on the relative importance of vertical MNEs. For the empirical specification, we suggest that the impact of time-invariant variables such as distance is most appropriately analysed in a Hausman-Taylor SUR model. We apply our model to industry-level data of bilateral outward FDI stocks and exports of the US and Germany. Copyright © 2004 John Wiley & Sons, Ltd.

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Paper provided by WIFO in its series WIFO Working Papers with number 164.

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Length: 24 pages
Date of creation: 07 Nov 2001
Date of revision:
Handle: RePEc:wfo:wpaper:y:2001:i:164

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Related research

Keywords: Internationalisation; Foreign Trade; Foreign Direct Investment; Distance; Trade and FDI: A Hausman-Taylor SUR Approach;

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References

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