The Role of Trade Costs in FDI Strategy of Heterogeneous Firms: Evidence from Japanese Firm-level Data
This paper attempts to clarify the reasons for the rapid growth of FDI in developing countries, particularly East Asian countries, compared with that of FDI in developed countries. To do this, we will examine the mechanics of HFDI and VFDI, in order to shed light on the role of trade costs. Our empirical analysis by estimating a multinomial logit model of Japanese firmsf FDI choices reveals that the reduction in trade costs between host and home countries attracts even less productive VFDI firms. In contrast, it does not attract HFDI firms. Since developing countries, particularly East Asian countries, have experienced a relatively rapid decrease in trade costs with Japan, our results indicate that the increase in VFDI through trade cost reduction has led to the recent relative surge of FDIs in developing countries.
Year of publication: |
2012-06-01
|
---|---|
Authors: | MATSUURA, Toshiyuki ; HAYAKAWA, Kazunobu |
Institutions: | Economic Research Institute for ASEAN and East Asia (ERIA) |
Saved in:
freely available
Saved in favorites
Similar items by person
-
Gains from Fragmentation at the Firm Level: Evidence from Japanese Multinationals in East Asia
HAYAKAWA, Kazunobu, (2009)
-
Dynamic Two-way Relationship between Exporting and Importing: Evidence from Japan
HAYAKAWA, Kazunobu, (2014)
-
Location Choice of Multinational Enterprises in China: Comparison between Japan and Taiwan
CHANG, Kuo-I, (2011)
- More ...