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Exports Versus Fdi In Smith-Motta Framework

Author

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  • Andrzej Cieslik

    () (University of Warsaw)

Abstract

In this paper we study the choice between exporting and foreign direct investment (FDI) in the Smith-Motta duopoly framework. First, we identify the conditions necessary for exporting and FDI, depending on the costs of exporting and the cost of foreign investment. Then, we discuss various proximity-concentration tradeoffs. Finally, we demonstrate that six possible types of equilibriums may emerge depending on various combinations of the key parameters of the model. These equilibriums include: a monopoly FDI equilibrium, a monopoly exporting equilibrium, a domestic monopoly equilibrium, a duopoly FDI equilibrium, a duopoly exporting equilibrium, and no entry equilibrium.

Suggested Citation

  • Andrzej Cieslik, 2016. "Exports Versus Fdi In Smith-Motta Framework," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 11(2), pages 189-218, June.
  • Handle: RePEc:pes:ierequ:v:11:y:2016:i:2:p:189-218
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    File URL: http://dx.doi.org/10.12775/EQUIL.2016.009
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    References listed on IDEAS

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    1. repec:krk:eberjl:v:5:y:2017:i:1:p:151-167 is not listed on IDEAS

    More about this item

    Keywords

    exporting; foreign direct investment; proximity-concentration tradeoff;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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