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Japanese and U.S. Exports and Investment as Conduits of Growth

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  • Jonathan Eaton
  • Akiko Tamura

Abstract

We develop a simple model of the choice between exploiting a technology in another country via export and via direct foreign investment. The model points to the destination country's size, level of technological sophistication, and distance from the source as factors in the decision. Moreover, it suggests that the effects of these variables may not only be nonhomogeneous but nonmonotonic as well. We use the model as a basis for estimating Japanese and U.S. exports and DFI positions around the world. Consistent with the theory we find that the importance of DFI relative to exports grows with population, although, contrary to our theory, the elasticity of DFI, as well as exports, with respect to population is less than one. We find that distance tends to inhibit DFI much less than it inhibits exports, as our theory predicts. We find some tendency for Japanese exports to rise relative to DFI as countries become more advanced with U.S. exports and DFI exhibiting the opposite tendency. Taking population, per capita income, factor endowments, and distance into account, we find Japan to be more open to U.S. exports than any region in the world except East Asia.

Suggested Citation

  • Jonathan Eaton & Akiko Tamura, 1996. "Japanese and U.S. Exports and Investment as Conduits of Growth," NBER Working Papers 5457, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:5457
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    References listed on IDEAS

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    1. Jonathan Eaton & Samuel Kortum, 1994. "International patenting and technology diffusion," Finance and Economics Discussion Series 94-35, Board of Governors of the Federal Reserve System (U.S.).
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    9. S. Lael Brainard, 1993. "An Empirical Assessment of the Proximity-Concentration Tradeoff between Multinational Sales and Trade," NBER Working Papers 4580, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Paul Brenton & Francesca Di Mauro & Matthias Lücke, 1999. "Economic Integration and FDI: An Empirical Analysis of Foreign Investment in the EU and in Central and Eastern Europe," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 26(2), pages 95-121, June.
    2. Agnès Bénassy-Quéré & Lionel Fontagné & Amina Lahrèche-Révil, 2005. "How Does FDI React to Corporate Taxation?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(5), pages 583-603, September.
    3. Assaf Razin & Efraim Sadka, 2006. "Vying for Foreign Direct Investment: A EU-type Model of Tax Competition," NBER Working Papers 11991, National Bureau of Economic Research, Inc.
    4. Shang-Jin Wei, 2000. "How Taxing is Corruption on International Investors?," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 1-11, February.
    5. Mutti, John & Grubert, Harry, 2004. "Empirical asymmetries in foreign direct investment and taxation," Journal of International Economics, Elsevier, vol. 62(2), pages 337-358, March.
    6. Herrmann, Roland & Möser, Anke & Weber, Sascha A., 2009. "Grocery retailing in Poland: Structural changes and foreign direct investment," Discussion Papers 40, Justus Liebig University Giessen, Center for international Development and Environmental Research (ZEU).
    7. repec:eee:iburev:v:27:y:2018:i:2:p:431-442 is not listed on IDEAS
    8. Adugna Lemi, 2004. "Foreign Direct Investment, Host Country Productivity And Export: The Case Of U.S. And Japanese Multinational Affiliates," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 29(1), pages 163-187, June.
    9. Roberta De Santis & Maria Cristina Mercuri & Claudio Vicarelli, 2001. "Taxes and Location of Foreign Direct Investments: an Empirical Analysys for the European Union Countries," ISAE Working Papers 24, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
    10. Di Mauro, Francesca, 2000. "Economic Integration Between The Eu And The Ceecs: A Sectoral Study," ERSA conference papers ersa00p358, European Regional Science Association.
    11. José Manuel Martins Caetano & Aurora Galego & Elsa Vaz & Isabel Vieira & Carlos Vieira, 2002. "The Impacts of the Eurozone´s Eastward Enlargement on Trade and FDI: Survey of the Literature," Economics Working Papers 1_2002, University of Évora, Department of Economics (Portugal).
    12. Akiomi Yutaka Horiba & Kazuo Yoshida, 2003. "Determinants Of The Initial Decisions By Japanese Firmsto Undertake Foreign Direct Investment," Discussion Papers in Economics and Business 03-09, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
    13. Head, Keith & Ries, John, 2005. "Judging Japan's FDI: The verdict from a dartboard model," Journal of the Japanese and International Economies, Elsevier, vol. 19(2), pages 215-232, June.
    14. Yin-Wong Cheung & Xingwang Qian, 2009. "The Empirics of China's Outward Direct Investment," CESifo Working Paper Series 2621, CESifo Group Munich.
    15. Linda S. Goldberg & Michael W. Klein, 1996. "Foreign direct investment, trade, and real exchange rate linkages in developing countries," Proceedings, Federal Reserve Bank of San Francisco, pages 73-100.
    16. Shang-Jin Wei, 2000. "Why Does China Attract So Little Foreign Direct Investment?," NBER Chapters,in: The Role of Foreign Direct Investment in East Asian Economic Development, NBER-EASE Volume 9, pages 239-265 National Bureau of Economic Research, Inc.
    17. Mariam Camarero & Cecilio Tamarit, 2003. "Estimating exports and imports demand for Manufactured goods: The role of FDI," European Economy Group Working Papers 22, European Economy Group.
    18. Shang-Jin Wei, 1997. "Why is Corruption So Much More Taxing Than Tax? Arbitrariness Kills," NBER Working Papers 6255, National Bureau of Economic Research, Inc.
    19. Lee Branstetter, 2000. "Is Foreign Direct Investment a Channel of Knowledge Spillovers? Evidence from Japan's FDI in the United States," NBER Working Papers 8015, National Bureau of Economic Research, Inc.
    20. Octavio Escobar, 2011. "The location pattern of FDI in Mexico after NAFTA," ERSA conference papers ersa10p804, European Regional Science Association.
    21. Elvira Sapienza, 2009. "The interaction between Export and FDI: Central-Eastern Europe and EU15," Quaderni DSEMS 13-2009, Dipartimento di Scienze Economiche, Matematiche e Statistiche, Universita' di Foggia.
    22. Branstetter, Lee, 2006. "Is foreign direct investment a channel of knowledge spillovers? Evidence from Japan's FDI in the United States," Journal of International Economics, Elsevier, vol. 68(2), pages 325-344, March.
    23. Valeriano Martínez-San Román & Marta Bengoa-Calvo & Blanca Sánchez-Robles Rute, 2013. "The Trade-FDI Nexus: Evidence from the European Union," Working Papers 2013/15, Economics Department, Universitat Jaume I, Castellón (Spain).

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