A Theory of the Relationship Between Foreign Direct Investment and Trade
Although empirical evidence shows that the relationship between foreign direct investment (FDI) and trade is complex, theories of international investment (both vertical and horizontal) present simple patterns of relation.By allowing for different locations of vertically-related stages of production and distinguishing between trade in finished goods and trade in intermediate goods, this paper introduces a nonmonotonic relationship between multinational firms and trade costs, which must be neither too high nor too low for FDI to arise. Exports and FDI behave as complements for high level of trade costs and as substitutes otherwise.
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|Date of creation:||2003|
|Date of revision:|
|Contact details of provider:|| Postal: Department of Economics, ISEG - School of Economics and Management, University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL|
Web page: https://aquila1.iseg.ulisboa.pt/aquila/departamentos/EC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Helpman, Elhanan, 1984.
"A Simple Theory of International Trade with Multinational Corporations,"
3445092, Harvard University Department of Economics.
- Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 451-71, June.
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- Rowthorn, R E, 1992. "Intra-industry Trade and Investment under Oligopoly: The Role of Market Size," Economic Journal, Royal Economic Society, vol. 102(411), pages 402-14, March.
- 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.
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211, National Institute of Economic and Social Research.
- 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, 01.
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