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A non-monotonic Relationship between FDI and Trade

Author

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  • Pontes, José Pedro

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

  • Pontes, José Pedro, 2006. "A non-monotonic Relationship between FDI and Trade," Dresden Discussion Paper Series in Economics 05/06, Technische Universität Dresden, Faculty of Business and Economics, Department of Economics.
    • Handle: RePEc:zbw:tuddps:0506
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    References listed on IDEAS

    as
    1. J. Peter Neary, 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. repec:ebl:ecbull:v:6:y:2004:i:2:p:1-8 is not listed on IDEAS
    4. Ignatius J. Horstmann & James R. Markusen, 2021. "Endogenous market structures in international trade (natura facit saltum)," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 2, pages 25-45, World Scientific Publishing Co. Pte. Ltd..
    5. 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.
    6. 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.
    7. Nigel Pain, 1997. "Export performance and and the role of foreign direct investment," National Institute of Economic and Social Research (NIESR) Discussion Papers 131, National Institute of Economic and Social Research.
    8. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Sebastian Krautheim, 2013. "Export-supporting FDI," Canadian Journal of Economics, Canadian Economics Association, vol. 46(4), pages 1571-1605, November.
    2. M. Emranul Haque & Arijit Mukherjee & Burcu Senalp, 2017. "Trade Cost Reduction and Foreign Direct Investment in a Vertical Structure," CESifo Working Paper Series 6689, CESifo.
    3. Armando J. Garcia Pires & José Pedro Pontes, 2013. "Spatial Scope Of A Modern Transport Technology," Journal of Regional Science, Wiley Blackwell, vol. 53(4), pages 712-723, October.
    4. Mukherjee, Arijit & Suetrong, Kullapat, 2012. "Trade cost reduction and foreign direct investment," Economic Modelling, Elsevier, vol. 29(5), pages 1938-1945.

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    More about this item

    Keywords

    Foreign Direct Investment; Trade; Theory of Location;
    All these keywords.

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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