I am grateful to my thesis adviser, Professor Richard E. Baldwin at the Graduate Institute, Geneva, for his invaluable advice. I would also like to express my sincere gratitude to anonymous referee(s) and the editor of this journal for their invaluable suggestions and to the seminar participants at ETSG 2010, Keio University, and Chukyo University for their useful comments. Financial support from the Japan Society for the Promotion of Science (Grant-in-Aid B-22330080) is gratefully acknowledged. The usual disclaimer applies.
Article first published online: 24 JAN 2013
© 2013 Blackwell Publishing Ltd
The World Economy
Volume 36, Issue 5, pages 563–581, May 2013
How to Cite
Ito, T. (2013), Export-Platform Foreign Direct Investment: Theory and Evidence. World Economy, 36: 563–581. doi: 10.1111/twec.12040
- Issue published online: 8 MAY 2013
- Article first published online: 24 JAN 2013
This paper proposes a model that accounts for ‘export-platform’ FDI – a form of FDI that is common in the data but rarely discussed in the theoretical literature. Unlike the previous literature, this paper’s theory nests all the typical modes of supply, including exports, horizontal and vertical FDI, horizontal and vertical export-platform FDI. The theory yields the testable hypothesis that a decrease in either inter-regional or intra-regional trade costs induces firms to choose export-platform FDI. The empirical analysis provides descriptive statistics that point to large proportions of third country exports of US FDI, and an econometric analysis, whose results are in line with the model’s predictions. The paper suggests policy implications for nations seeking to attract FDI.