Trade cost reduction and foreign direct investment |
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Authors: | Arijit Mukherjee Kullapat Suetrong |
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Institution: | 1. University of York, UK;2. CESifo, Germany;3. Department of Business Development, Ministry of Commerce, Thailand |
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Abstract: | While the “proximity-concentration” theory suggests a positive relationship between trade cost and foreign direct investment (FDI), there is ample evidence showing a negative relationship between them. We show that the possibility of exporting back to the home country from a host country, which is often referred as “home-country export platform FDI”, may generate a negative relationship between trade cost and FDI. Market demand and product market competition may play important roles in this respect. |
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Keywords: | Export FDI Trade cost |
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