Some new evidence on intra-industry trade and complex FDI in ASEAN countries: a spatial panel approach

Nathapornpan Piyaareekul Uttama

International Journal of Economics and Business Research, 2012, vol. 4, issue 1/2, 116-131

Abstract: This paper examines the interaction on intra-industry trade (IIT) and foreign direct investment (FDI) with special attention to the Association of Southeast Asian Nations (ASEAN). We introduce the 2×3×3 knowledge-capital model, recently proposed by Baltagi et al. (2007) and Uttama and Péridy (2009). The theoretical implications are suggested, not only how IIT is determined by country characteristics, such as similarity in market size and factor differentials, but also trade costs as well as regional economic integration. Moreover, it also empirically investigates the determinants of aggregated and disaggregated IIT in five ASEAN countries over the period 19952008, concerned with what extent complex FDIs boost IIT. Using spatial panel data model, we find the fact that the empirical results are consistent with the theoretical predictions. Vertical FDI tends to discourage ASEAN’s IIT, whereas complex horizontal FDI in neighbours tends to encourage its IIT in ASEAN.

Keywords: foreign direct investment; spatial econometrics; ASEAN; Association of Southeast Asian Nations; Indonesia; Malaysia; Philippines; Singapore; Thailand; spatial panels; knowledge-capital models; Badi Hani Baltagi; Nathapornpan Piyaareekul Uttama; country characteristics; market size; factor differentials; trade costs; economic integration; vertical FDI; complex FDI; horizontal FDI; Nicolas Péridy; economics; business research; intra-industry trade. (search for similar items in EconPapers)
Date: 2012
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