Trade costs and foreign direct investment

DC FieldValueLanguage
dc.contributor.authorNeary, J. Peter-
dc.description.abstractThis paper reviews the theory of foreign direct investment (FDI), focusing on an apparent con‡ict between theory and recent trends in the globalized world. The bulk of FDI is horizontal rather than vertical, but horizontal FDI is discouraged when trade costs fall. This seems to conflict with the experience of the 1990s, when trade liberalisation and technological change led to dramatic reductions in trade costs yet FDI grew much faster than trade. Two possible resolutions to this paradox are explored. First, horizontal FDI in trading blocs is encouraged by intra-bloc trade liberalisation, because foreign firms establish plants in one country as export platforms to serve the bloc as a whole. Second, cross-border mergers, which are quantitatively more important than greenfield FDI, are encouraged rather than discouraged by falling trade costs.en
dc.format.extent295965 bytes-
dc.publisherUniversity College Dublin. School of Economicsen
dc.relation.ispartofseriesUCD Centre for Economic Research Working Paper Seriesen
dc.relation.isversionofNeary, P. "Trade Costs and Foreign Direct Investment". Keynote lecture at the CESifo Venice Summer Institute Workshop on Recent Developments in International Trade: Globalization and the Multinational Enterprise, San Servolo, 18 - 19 July 2005en
dc.subjectCross-border mergers and acquisitionsen
dc.subjectExport platform FDIen
dc.subjectForeign direct investmenten
dc.subjectInternational trade policyen
dc.subjectTrade liberalisationen
dc.subject.lcshCommercial policyen
dc.subject.lcshConsolidation and merger of corporationsen
dc.subject.lcshInvestments, Foreignen
dc.subject.lcshFree tradeen
dc.titleTrade costs and foreign direct investmenten
dc.typeWorking Paperen
dc.internal.availabilityFull text availableen
dc.statusNot peer revieweden
dc.neeo.contributorNeary|J. Peter|aut|-
item.fulltextWith Fulltext-
Appears in Collections:Economics Working Papers & Policy Papers
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