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Foreign direct investment, international trade, and firm heterogeneity

Hiroyuki Nishiyama and Masao Yamaguchi

Economic Modelling, 2010, vol. 27, issue 1, 184-195

Abstract: We present an asymmetric model with firm heterogeneity and foreign direct investment (FDI) from a developed country to a developing country. We found that the successful entry firms could be sorted from highest to lowest according to productivity as reimport firms, FDI firms, export firms, and domestic firms. We also found that FDI decreases (increases) the gross national income of the developed (developing) country, but it can either increase or decrease the world income according to the level of the relative propensity to spend. In addition, we demonstrated that FDI influences welfare through variations in average price, national income, and the number of types of goods.

Keywords: North-South; model; Firm; heterogeneity; Foreign; direct; investment; Reimport; World; welfare (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (4)

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