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Export-Platform Investment with Proximity and Product Differentiation: Empirical Evidence from Port-Level International Trade

  • Yushi Yoshida

    ()

    (Faculty of Economics, Kyushu Sangyo University)

Multinational firms engage in foreign direct investments to minimize production costs and trade costs. In stead of making foreign direct investment, a firm may find optimal to produce in a periphery region of home country as an export-platform base to minimize these costs. With over 1,000 products categories of exports for six major Japanese ports, this paper empirically examines exports of sub-regions within a country in a gravity model. We obtained strong evidence that proximity of local ports to foreign market increases local-port exports even when destination is fixed to a single country. More importantly, we found that sensitivity of proximity of ports to foreign markets is more pronounced for an industry with higher Asia-intensity exports and a more product-differentiated industry. We can conclude from our empirical evidences that an industry with these characteristics sets up an export-platform base in peripheral regions of home country to minimize international trade costs.

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File URL: http://www.ip.kyusan-u.ac.jp/keizai-kiyo/dp28.pdf
File Function: First version, 2007Dec
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Paper provided by Kyushu Sangyo University, Faculty of Economics in its series Discussion Papers with number 28.

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Length: 34 pages
Date of creation: Dec 2007
Date of revision:
Handle: RePEc:kyu:dpaper:28
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  1. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
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