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FDI and trade: complements and substitutes

Author

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  • Jose Pedro Pontes

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

  • Jose Pedro Pontes, 2006. "FDI and trade: complements and substitutes," Working Papers Department of Economics 2006/03, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    • Handle: RePEc:ise:isegwp:wp32006
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    References listed on IDEAS

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    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. 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.
    4. 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.
    5. repec:ebl:ecbull:v:6:y:2004:i:2:p:1-8 is not listed on IDEAS
    6. 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..
    7. 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.
    8. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Han-Sol Lee & Alexander M. Zobov & Ekaterina A. Degtereva, 2022. "The role of governance and market openness on bilateral trade flows of South Korea with CEE and CIS countries," Russian Journal of Economics, ARPHA Platform, vol. 8(4), pages 333-351, December.
    2. Amadou Maiga Ousseini & Oumarou Issoufou & Coulibaly Salifou Kigbajah, 2019. "Foreign Direct Investment and International Trade in WAEMU- Panel Causality and Long-term Relationship Analysis," Review of Economics, De Gruyter, vol. 70(2), pages 193-212, August.

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    More about this item

    Keywords

    Foreign Direct Investment; Trade; Firm Location.;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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