A theory of the relationship between foreign direct investment and trade

José Pontes

ERSA conference papers from European Regional Science Association

Abstract: Although empirical evidence shows that the relationship between foreign direct investment (FDI) and trade is complex, theories of international investment (both vertical and horizontal) present simple patterns of relation. By allowing for different locations of vertically-related stages of production and distinguishing between trade in finished goods and trade in intermediate goods, this paper introduces a non monotonic relationship between multinational firms and trade costs, which must be neither too high nor too low for FDI to arise. Exports and FDI be have as complements for high levels of trade costs and as substitutes otherwise. J.E.L. Classification: F23, F12, C72. Keywords: Foreign Direct Investment, Multinationals, Trade, Intermediate Goods, Non cooperative Games.

Date: 2004-08
New Economics Papers: this item is included in nep-geo, nep-int and nep-mic
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Citations: View citations in EconPapers (8)

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Related works:
Journal Article: A theory of the relationship between foreign direct investment and trade (2004)
Working Paper: A Theory of the Relationship Between Foreign Direct Investment and Trade (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:wiw:wiwrsa:ersa04p47

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