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FDI and trade: complements and substitutes

Author

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  • Jose Pedro Pontes

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.

Suggested Citation

  • Jose Pedro Pontes, 2006. "FDI and trade: complements and substitutes," Working Papers Department of Economics 2006/03, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
  • Handle: RePEc:ise:isegwp:wp32006
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    File URL: http://pascal.iseg.utl.pt/~depeco/wp/wp032006.pdf
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    References listed on IDEAS

    as
    1. Neary, J Peter, 2002. "Foreign Direct Investment and the Single Market," Manchester School, University of Manchester, vol. 70(3), pages 291-314, June.
    2. José Pedro Pontes, 2004. "A theory of the relationship between foreign direct investment and trade," Economics Bulletin, AccessEcon, vol. 6(2), pages 1-8.
    3. 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.
    4. 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.
    5. repec:ebl:ecbull:v:6:y:2004:i:2:p:1-8 is not listed on IDEAS
    6. 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.
    7. 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.
    8. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Foreign Direct Investment; Trade; Firm Location.;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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