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A non-monotonic relationship between FDI and trade

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  • Pontes, Jose Pedro

Abstract

This paper presents a non-monotonic relationship between foreign direct investment and trade based on the idea that, although FDI eliminates trade costs on the final good, the investing firm has to bear increased trade costs on an intermediate good.
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Suggested Citation

  • Pontes, Jose Pedro, 2007. "A non-monotonic relationship between FDI and trade," Economics Letters, Elsevier, vol. 95(3), pages 369-373, June.
  • Handle: RePEc:eee:ecolet:v:95:y:2007:i:3:p:369-373
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    References listed on IDEAS

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    1. Horstmann, Ignatius J. & Markusen, James R., 1992. "Endogenous market structures in international trade (natura facit saltum)," Journal of International Economics, Elsevier, vol. 32(1-2), pages 109-129, February.
    2. Neary, J Peter, 2002. "Foreign Direct Investment and the Single Market," Manchester School, University of Manchester, vol. 70(3), pages 291-314, June.
    3. Pain, Nigel & Wakelin, Katharine, 1998. "Export Performance and the Role of Foreign Direct Investment," The Manchester School of Economic & Social Studies, University of Manchester, vol. 66(0), pages 62-88, Supplemen.
    4. Bettina Becker & Nigel Pain, 2008. "What Determines Industrial R&D Expenditure In The Uk?," Manchester School, University of Manchester, vol. 76(1), pages 66-87, January.
    5. Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 451-471, June.
    6. S. Lael Brainard, 1993. "A Simple Theory of Multinational Corporations and Trade with a Trade-Off Between Proximity and Concentration," NBER Working Papers 4269, National Bureau of Economic Research, Inc.
    7. repec:ebl:ecbull:v:6:y:2004:i:2:p:1-8 is not listed on IDEAS
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    Cited by:

    1. Sebastian Krautheim, 2013. "Export-supporting FDI," Canadian Journal of Economics, Canadian Economics Association, vol. 46(4), pages 1571-1605, November.
    2. Mukherjee, Arijit & Suetrong, Kullapat, 2012. "Trade cost reduction and foreign direct investment," Economic Modelling, Elsevier, vol. 29(5), pages 1938-1945.
    3. M. Emranul Haque & Arijit Mukherjee & Burcu Senalp, 2017. "Trade Cost Reduction and Foreign Direct Investment in a Vertical Structure," CESifo Working Paper Series 6689, CESifo Group Munich.

    More about this item

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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