Trade cost reduction and foreign direct investment

Arijit Mukherjee and Kullapat Suetrong

Economic Modelling, 2012, vol. 29, issue 5, 1938-1945

Abstract: While the “proximity-concentration” theory suggests a positive relationship between trade cost and foreign direct investment (FDI), there is ample evidence showing a negative relationship between them. We show that the possibility of exporting back to the home country from a host country, which is often referred as “home-country export platform FDI”, may generate a negative relationship between trade cost and FDI. Market demand and product market competition may play important roles in this respect.

Keywords: Export; FDI; Trade cost (search for similar items in EconPapers)
JEL-codes: F12 F21 F23 L13 L24 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:29:y:2012:i:5:p:1938-1945

DOI: 10.1016/j.econmod.2012.06.008

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