Foreign Direct Investment and Host-Country Trading Blocs

Jeff Heinrich () and Denise Konan
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Jeff Heinrich: University of Wisconsin-Whitewater, Postal: Department of Economics, University of, Wisconsin-Whitewater, Whitewater, WI 53190, USA

Journal of Economic Integration, 2000, vol. 15, 565-584

Abstract:

We consider the impact of preferential trade agreements (PTAs) on horizontal foreign direct investment (FDI) coming from parent countries outside the PTA. While easier access to a larger market due to a PTA may justify new FDI, preexisting investments may be rationalized as firms concentrate production in a single plant in the PTA. Which effect dominates depends on the extent of pre-PTA tariff jumping. The number of firms in the industry and non-PTA welfare may rise or fall. PTA welfare increases regardless of PTA-induced changes in inward FDI.

Keywords: Multinational Enterprise; Foreign Direct Investment; Regional Integration; Preferential Trade Agreements (search for similar items in EconPapers)
JEL-codes: F12 F15 F23 (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:0146

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