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Relative factor abundance and FDI factor intensity in developed countries

  • Alfons Palangkaraya
  • Andreas Waldkirch

This study looks at the link between the patterns of trade-revealed comparative advantage and net inward foreign direct investment in five developed countries: the United Kingdom, the United States, Japan, France, and Italy. It thus extends earlier work by Maskus and Webster (1995) who analyzed two countries, the United Kingdom and South Korea. Despite assertions in the literature that market access is the primary motive for foreign direct investment flows among developed countries, this study shows that there is a significant role for comparative advantage in determining inflows of foreign direct investment in developed countries, especially in the services industry.

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Article provided by Taylor & Francis Journals in its journal International Economic Journal.

Volume (Year): 22 (2008)
Issue (Month): 4 ()
Pages: 489-508

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Handle: RePEc:taf:intecj:v:22:y:2008:i:4:p:489-508
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  1. Donald R. Davis & David E. Weinstein, 1998. "An Account of Global Factor Trade," NBER Working Papers 6785, National Bureau of Economic Research, Inc.
  2. Markusen, James R., 1984. "Multinationals, multi-plant economies, and the gains from trade," Journal of International Economics, Elsevier, vol. 16(3-4), pages 205-226, May.
  3. Debeare, Peter, 2003. "Relative Factor Abundance and Trade," Journal of Political Economy, University of Chicago Press, vol. 111(3), pages 589-610, June.
  4. L. Nachum & J. H. Dunning & G. G. Jones, 2000. "UK FDI and the Comparative Advantage of the UK," The World Economy, Wiley Blackwell, vol. 23(5), pages 701-720, 05.
  5. Henrik Braconier & Pehr-Johan Norback & Dieter Urban, 2002. "Vertical FDI Reviseted," Development Working Papers 167, Centro Studi Luca d\'Agliano, University of Milano.
  6. David L. Carr & James R. Markusen & Keith E. Maskus, 1998. "Estimating the Knowledge-Capital Model of the Multinational Enterprise," NBER Working Papers 6773, National Bureau of Economic Research, Inc.
  7. Bruce A. Blonigen & Ronald B. Davies & Keith Head, 2003. "Estimating the Knowledge-Capital Model of the Multinational Enterprise: Comment," American Economic Review, American Economic Association, vol. 93(3), pages 980-994, June.
  8. Lionel Fontagné & Michaël Pajot, 1997. "How Foreign Direct Investment Affects International Trade and Competitiveness: an Empirical Assessment," Working Papers 1997-17, CEPII research center.
  9. James R. Markusen, 1997. "Trade versus Investment Liberalization," NBER Working Papers 6231, National Bureau of Economic Research, Inc.
  10. Robert E. Lipsey, 2000. "Interpreting Developed Countries' Foreign Direct Investment," NBER Working Papers 7810, National Bureau of Economic Research, Inc.
  11. Stephen Ross Yeaple, 2003. "The Role of Skill Endowments in the Structure of U.S. Outward Foreign Direct Investment," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 726-734, August.
  12. Cörvers F. & Reininga T., 1998. "The Dutch Factor Content of Human and Physical Capital: A Test of the HOV Model," ROA Research Memorandum 001, Maastricht University, Research Centre for Education and the Labour Market (ROA).
  13. Robert E. Lipsey & Zadia Feliciano, 2002. "Foreign Entry into U.S. Manufacturing by Takeovers and the Creation of New Firms," NBER Working Papers 9122, National Bureau of Economic Research, Inc.
  14. Gabrielle Lipworth & Tamim Bayoumi, 1997. "Japanese Foreign Direct Investment and Regional Trade," IMF Working Papers 97/103, International Monetary Fund.
  15. James R. Markusen & Keith E. Maskus, 2001. "General-Equilibrium Approaches to the Multinational Firm: A Review of Theory and Evidence," NBER Working Papers 8334, National Bureau of Economic Research, Inc.
  16. Blonigen, Bruce A, 1997. "Firm-Specific Assets and the Link between Exchange Rates and Foreign Direct Investment," American Economic Review, American Economic Association, vol. 87(3), pages 447-65, June.
  17. Wheeler, David & Mody, Ashoka, 1992. "International investment location decisions : The case of U.S. firms," Journal of International Economics, Elsevier, vol. 33(1-2), pages 57-76, August.
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