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

Author

Listed:
  • Yushi Yoshida

    (Faculty of Economics, Kyushu Sangyo University)

Abstract

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.

Suggested Citation

  • Yushi Yoshida, 2007. "Export-Platform Investment with Proximity and Product Differentiation: Empirical Evidence from Port-Level International Trade," Discussion Papers 28, Kyushu Sangyo University, Faculty of Economics.
    • Handle: RePEc:kyu:dpaper:28
    as

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    File URL: http://www.ip.kyusan-u.ac.jp/keizai-kiyo/dp28.pdf
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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