Deep Trade Agreements and FDI in Partial and General Equilibrium: A Structural Estimation Framework

Mario Larch and Yoto Yotov

No 2022-7, School of Economics Working Paper Series from LeBow College of Business, Drexel University

Abstract: We quantify the relationships between deep trade liberalization and foreign direct investment (FDI). To this end, we focus on the effects of Deep Trade Agreements (DTAs), and we rely on a structural framework that simultaneously enables us to (i) estimate the direct impact of DTAs on FDI, (ii) translate the partial DTA estimates into general equilibrium effects on FDI; and (iii) obtain partial DTA effects on trade and quantify the impact of DTAs on FDI through trade. We obtain sizable, positive, and statistically significant estimates of the effects of DTAs on both trade and FDI. A counterfactual analysis suggests that, in combination through direct and indirect channels, DTAs have contributed to a large but very asymmetric increase in inward vs. outward FDI.

Keywords: Foreign Direct Investment (FDI); Trade Liberalization; Deep Trade Agreements (search for similar items in EconPapers)
JEL-codes: F10 F43 O40 (search for similar items in EconPapers)
Pages: 61 pages
Date: 2022-09-25
New Economics Papers: this item is included in nep-fdg and nep-int
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Deep Trade Agreements and FDI in Partial and General Equilibrium: A Structural Estimation Framework (2023)
Working Paper: Deep Trade Agreements and FDI in Partial and General Equilibrium: A Structural Estimation Framework (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:drxlwp:2022_007

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