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FDI-Trade Nexus: New Evidence from Product-Level Data


  • Shuhei Nishitateno


The difficulty in finding the substitution effects on exports of foreign direct investment has posed challenges to empirical analysts. In analysing newly-constructed product-level data that enable endogeneity and aggregation bias to be addressed simultaneously, this study finds that auto part exports from Japan are positively correlated with overseas operations by Japanese automakers but negatively correlated with overseas operations by Japanese suppliers. However, the evidence on the latter is rather weak consistent with the fact that Japanese suppliers predominantly sell their products to Japanese automakers at the initial stage but that they are expanding their business with non-Japanese firms in host countries over time.

Suggested Citation

  • Shuhei Nishitateno, 2012. "FDI-Trade Nexus: New Evidence from Product-Level Data," Global COE Hi-Stat Discussion Paper Series gd11-225, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hst:ghsdps:gd11-225

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    Foreign Direct Investments; Trade; Automobile; Japan;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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