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Trade cost reduction and foreign direct investment

  • Mukherjee, Arijit
  • Suetrong, Kullapat

While the “proximity-concentration” theory suggests a positive relationship between trade cost and foreign direct investment (FDI), there is ample evidence showing a negative relationship between them. We show that the possibility of exporting back to the home country from a host country, which is often referred as “home-country export platform FDI”, may generate a negative relationship between trade cost and FDI. Market demand and product market competition may play important roles in this respect.

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File URL: http://www.sciencedirect.com/science/article/pii/S0264999312001812
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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 29 (2012)
Issue (Month): 5 ()
Pages: 1938-1945

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Handle: RePEc:eee:ecmode:v:29:y:2012:i:5:p:1938-1945
DOI: 10.1016/j.econmod.2012.06.008
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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