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Reform Creating Regional Trade Agreements And Foreign Direct Investment: Applications For East Asia

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  • Innwon Park
  • Soonchan Park

Abstract

We estimate the investment creation and diversion effects of RTAs by using an extended gravity equation focusing on domestic reform as a commitment device for RTA membership. As a case study, we estimate the impact of proposed East Asian RTAs on inward FDI. We find that: (i) reform creating RTA membership, larger market size, better skilled labour and lower trade costs all contribute positively and significantly to inward FDI; and (ii) most of the proposed East Asian RTAs promote intra-bloc FDI. In particular, both South-North and North-North RTAs prove to be more preferable membership combinations to South-South RTAs in East Asia. Copyright 2008 The Authors. Journal compilation 2008 Blackwell Publishing Asia Pty Ltd

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  • Innwon Park & Soonchan Park, 2008. "Reform Creating Regional Trade Agreements And Foreign Direct Investment: Applications For East Asia," Pacific Economic Review, Wiley Blackwell, vol. 13(5), pages 550-566, December.
  • Handle: RePEc:bla:pacecr:v:13:y:2008:i:5:p:550-566
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    Cited by:

    1. Dee, Philippa & McNaughton, Anne, 2011. "Promoting Domestic Reforms through Regionalism," ADBI Working Papers 312, Asian Development Bank Institute.
    2. Thangavelu, Shandre M. & Narjoko, Dionisius, 2014. "Human capital, FTAs and foreign direct investment flows into ASEAN," Journal of Asian Economics, Elsevier, pages 65-76.
    3. Li, Qiaomin & Scollay, Robert & Maani, Sholeh, 2016. "Effects on China and ASEAN of the ASEAN-China FTA: The FDI perspective," Journal of Asian Economics, Elsevier, pages 1-19.
    4. Verico, Kiki, 2012. "The Impact of Intra Regional Trade Agreement on FDI Inflows in Southeast Asia: Case of Indonesia, Malaysia and Thailand," MPRA Paper 42087, University Library of Munich, Germany, revised 20 Oct 2012.
    5. Tanaka, Kiyoyasu & Arita, Shawn, 2016. "The impact of regional investment liberalization on foreign direct investment: A firm-level simulation assessment," Japan and the World Economy, Elsevier, pages 17-26.
    6. Waldkirch Andreas & Tekin-Koru Ayça, 2010. "North American Integration and Canadian Foreign Direct Investment," The B.E. Journal of Economic Analysis & Policy, De Gruyter, pages 1-40.
    7. Pritha Mitra, 2010. "How Can Regional Public Expenditure Stimulate FDI in the Mekong?," Chapters,in: Globalization and Development in the Mekong Economies, chapter 5 Edward Elgar Publishing.
    8. Shawn ARITA & TANAKA Kiyoyasu, 2013. "Regional Investment Liberalization and FDI," Discussion papers 13088, Research Institute of Economy, Trade and Industry (RIETI).

    More about this item

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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