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Heterogeneity and the FDI versus Export Decision of Japanese Manufacturers

  • Keith Head
  • John Ries

We investigate whether productivity differences explain why some manufacturers sell only to the domestic market while others serve foreign markets through exports and/or FDI. When overseas production offers no cost advantages, our model predicts that investors should be more productive than exporters. An extension allowing for low-cost foreign production can reverse this prediction. Data for 1070 large Japanese firms reveal that firms that invest abroad and export are more productive than firms that just export. Among overseas investors, more productive firms span a wider range of host-country income levels.

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File URL: http://www.nber.org/papers/w10052.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10052.

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Date of creation: Oct 2003
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Publication status: published as Head, Keith and John Ries. "Heterogeneity And The FDI Versus Export Decision Of Japanese Manufacturers," Journal of the Japanese and International Economies, 2003, v17(4,Dec), 448-467.
Handle: RePEc:nbr:nberwo:10052
Note: ITI
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  1. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jenson & Samuel Kortum, 2000. "Plants and Productivity in International Trade," NBER Working Papers 7688, National Bureau of Economic Research, Inc.
  2. Chad Syverson, 2001. "Market Structure and Productivity: A Concrete Example," Working Papers 01-06, Center for Economic Studies, U.S. Census Bureau.
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