Protectionist Threats and Foreign Direct Investment

Bruce Blonigen and Robert Feenstra

No 5475, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The recent literature on quid pro quo foreign direct investment (FDI) suggests that FDI may be induced by the threat of protection, and further, that FDI may be used as an instrument to defuse a protectionist threat. This paper uses a panel data set of 4-digit SIC level observations of Japanese manufacturing FDI into the United States in the 1980s to explore these hypotheses empirically. We find strong statistical support for the hypothesis that higher threats of protection lead to greater FDI flows, and post-regression simulations find that a rise in the expected probability of protection from five to ten percent means over a 30 percent rise in next-period FDI flows for an average industry. In addition, there is evidence that non- acquisition FDI by the Japanese had success in defusing the threat of an escape clause investigation in future periods.

JEL-codes: F13 F21 (search for similar items in EconPapers)
Date: 1996-03
Note: ITI
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Published as The Effects of US Trade Protection and Promotion Policies, R. Feenstra., edpp. 55-80, (Chicago: University of Chicago Press, 1997).
Published as Protectionist Threats and Foreign Direct Investment , Bruce A. Blonigen, Robert C. Feenstra. in The Effects of US Trade Protection and Promotion Policies , Feenstra. 1997

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Related works:
Working Paper: Protectionist Threats and Foreign Direct Investment (2003)
Chapter: Protectionist Threats and Foreign Direct Investment (1997)
Working Paper: PROTECTIONIST THREATS AND FOREIGN DIRECT INVESTMENT
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