FDI, services trade and economic growth in India: empirical evidence on causal links

This article examines the linkages between inward FDI, services trade (export and import) and economic output using co-integration and VECM causality test. These linkages have been explored both at the aggregate and at the sectoral levels (manufacturing and services). The empirical findings confirm the long-run relationship among these variables. Causality results indicate the presence of bi-directional causal relationship between FDI and economic output as well as between services exports and economic output. The results also bring out feedback relationship between services export and FDI, reconfirming the presence of complementary relationship between the two. At the sectoral level, we find at least a unidirectional causality from FDI and services exports to both manufacturing and services output and also cross-sectoral spillover effects from manufacturing output to services output and vice versa.     

Does WTO accession matter for the dynamics of foreign direct investment and trade?

The aim of this article is to study the impacts of World Trade Organization accession on the dynamics of foreign direct investment (FDI) and trade in Vietnam. In order to do this, we employ an augmented gravity model and use a panel data set covering bilateral trade and FDI between Vietnam and its 17 most important partner countries, over the period 1990–2008. Firstly, we find that WTO accession has a significantly positive effect both on Vietnam’s imports and on inward FDI. Secondly, even though we find no evidence to demonstrate convincingly that WTO accession influences Vietnam’s exports, this accession seems to indirectly encourage Vietnam’s exports through the FDI channel due to a strong connection between these two.     

Aid for trade and international transactions in goods and services

The empirical literature on aid for trade (AfT) mainly considers its effects on merchandise trade and investment. In this paper, we provide an in‐depth analysis of the relationship between AfT and trade in services using both aggregate and bilateral data. We find a statistically weak effect of AfT on both goods and services trade in our aggregate analysis once we account for endogeneity in the AfT–trade relationship. In contrast, the bilateral analysis suggests that AfT, in particular that allocated to services activities, especially economic infrastructure, has a positive effect on recipients’ merchandise exports to donor countries. This novel finding is robust across different lag structures and provides evidence of complementarities between services AfT and goods trade.     

What can Trigger the Resumption of Economic Growth in a Small Open Economy like Greece: Exports or Inward FDI?

The purpose of this article is to investigate the effect of exports and inward foreign direct investment (FDI) on economic development in Greece, in the long and short run, from 1980 to 2013. This study applies the Ng-Perron and DF-GLS unit root tests to determine the level of integration as well as the autoregressive distributed lag (ARDL) method to identify the long-run relationship. Our analysis confirms the long-run relationship between inward FDI, exports and national income. Our results imply that any policy by the Greek Government aimed at boosting economic development through exports will have to be considered for the long run since Greek authorities cannot rely on exports in the short run. However, inward FDI appears more efficient than exports as far as boosting economic progress in the short run.     

The influence of international trade on labour productivity in services: The case of Brazil in the 1990s

In the developing world, services account for a rising share of domestic employment and international trade. Thus, it is important to know whether trade liberalization contributes to labour productivity in services. We explore this question, examining the 1990–2000 Brazilian trade liberalization. We find that growth of imports and exports strengthened labour productivity in services, but the contribution was smaller in subsectors with more college graduates, and this negative offset was larger in subsectors that received large foreign direct investment (FDI) inflows. Improved access to imported manufactured intermediate inputs raised downstream services' labour productivity and downstream manufacturing firms benefitting from tariff cuts enacted by trade partners generated spillovers that improved the labour productivity of upstream service subsectors. However, FDI inflows and investments in human and physical capital modified these downstream factors. We conclude that the Brazilian trade liberalization strengthened productivity in services, but unequally across subsectors.     

对外直接投资的贸易效应研究--基于中国经验的实证分析

对外直接投资与出口贸易之间的关系一直是相关理论和实证研究的争论主题。运用引力模型,对中国FD I的贸易效应进行实证分析表明:中国对东道国的直接投资促进中国对东道国的出口,但对从东道国的进口却具有替代效应。因此,大力促进中国对外直接投资,是促进中国的对外出口、绕开东道国贸易壁垒的重要途径。     

Revisiting Exports and Foreign Direct Investment in Vietnam

Since 1986, Vietnam has undertaken various reform measures in the trade and foreign investment area. This paper finds significant contributions of world trade, and competitiveness and liberalization effects to Vietnam's export growth over the period 1997–2008. Vietnam's exports became more competitive and better complemented the import demand of Vietnam's trade partners. In addition, dynamic comparative advantage became evident in many products, but significant room remains for improving export competitiveness. Foreign direct investment (FDI) inflows also increased and helped stimulate Vietnam's exports. FDI inflows have increased in both the short‐ and long‐term, yet are only of a limited magnitude. This necessitates more effective measures to enhance the linkages between FDI and domestic enterprises.     

THE IMPACT OF TRADE AND INVESTMENT AGREEMENTS ON AUSTRALIA'S INWARD FDI FLOWS

International trade and investment agreements are one of the primary instruments of global financial liberalisation. They are enacted to enhance the flows of foreign direct investment (FDI) between signatories by reducing regulatory barriers to investment; promoting stable host investment environments; and guaranteeing investors against non‐commercial risk. As a net capital importer, Australia has sought to attract FDI through participation in such accords since the early 1980s. This paper examines the determinants of Australia's inward FDI flows—focussing specifically on the effects of trade and investment agreements. Using panel data, we find that both bilateral trade and bilateral and multilateral investment agreements attract FDI flows into Australia, thereby indicating that the policy of enticing FDI through participation in these accords is quite possibly effective.     

Determinants of foreign direct investment of OECD countries 1991–2001

It is the objective of this paper to identify the determinants that led to the increase in worldwide foreign direct investment during the 1990s. The paper also addresses the question of whether these factors influenced exports differently. Therefore, using data from 22 countries reporting to the OECD, gravity models for bilateral FDI stocks/flows and exports are estimated, first in a cross-section setting for 1999 and then as a panel data set for the period 1991–2001. In order to control for EU-specific effects, a distinction is made between intra-EU25 observations and observations outside the EU25 area. Regressions are repeated with exports as a dependent variable in order to elaborate how far determinants of trade flows are identical or how far they differ. In the panel context, the results show that a change in total market size is an important aspect that leads both FDI and exports in the same direction. Only exports are significantly influenced by relative market size. Stock market booms boost FDI but not exports. Political indicators and exchange rate changes suggest that exports are demand-driven while FDI is supply-driven. Overall, FDI and exports tended to flow relatively less abundantly to distant countries than to nearby countries over the period under consideration. This supports the idea of a complementary relationship between investment and trade. However, this trend is reversed for exports within the EU25 area.     

Regional analysis of the impact of inward foreign direct investment on economic growth in the Chinese electronic industry

This article empirically investigates the impact of inward foreign direct investment (FDI) on regional economic growth in the Chinese electronic industry (CEI). Utilizing a provincial-level panel data spanning the period 1989 to 2009, we specify and estimate an endogenous economic growth model for the CEI. Empirical results indicate that, for the coastal region, FDI inflows have been growth enhancing, while in the central and western regions the impact of FDI on economic growth is mixed, depending on the channel of capital flow. Results also indicate that exports, human capital, science and technology investment and fixed asset investment are growth enhancing, while unemployment and foreign R&D investment are growth impeding in the CEI.     

外商直接投资对中国对外贸易影响的实证分析

本文以中国和其它24个国家或地区的最近3年的外贸和外资的实际数据为基础,用统计计量学方法对外商直接投资(FDI)和国际贸易关系进行实证研究,定量论证了FDI的贸易促进作用,在此基础上,还对中国与各个国家或地区之间贸易规模差异进行了阐述.     

THE IMPACT OF TRADE AND FOREIGN DIRECT INVESTMENT POLICIES ON TECHNOLOGY ADOPTION AND SOURCING OF CHINESE FIRMS

How do trade and foreign direct investment (FDI) policies impact the decisions of firms in technology adoption (process vs. product innovations) and sourcing (internal vs. external and foreign vs. domestic)? We use a sample of Chinese firms to address this question. China's trade and FDI policies lead to different forms of internationalization: ordinary exports, processing exports, majority FDI, and minority FDI. We find that both exporting and FDI stimulate process innovation; ordinary exports, processing exports, and FDI have strong, weak, and no effects on stimulating product innovation, respectively. Exporting firms source technologies both internally through R&D and externally from foreign and domestic sources. FDI firms have a lower tendency of internal technology development and domestic technology sourcing, but a much higher tendency of foreign technology sourcing than exporting firms. (JEL F13, F23, O32)     

Trade, Multinational Sales, and FDI in a Three-factor Model

The overwhelming importance of multinational activities as well as the coexistence of exporters and multinationals within the developed countries demand for theoretical models which provide a convincing explanation of simultaneous two‐way trade and horizontal multinational activities. We present a model with three factors of production to disentangle the two‐fold role of headquarters for their affiliates into a know‐how (headquarters services) and a capital‐serving part (FDI). We simulate the model to derive predictions about the impact of trade costs, plant set‐up costs, fixed multinational network costs, relative country size and factor endowments on exports, multinational sales and FDI. The effects are not uniform for multinational sales and FDI. Whereas exports and affiliate sales increase with the similarity in country size, FDI is more likely to increase monotonously with the sending country's size.     

Asymmetric Demand Information and Foreign Direct Investment*

We examine the FDI versus exports decision of firms competing in an oligopolistic (quantity‐setting) market under demand uncertainty and asymmetric information. Compared to a firm that chooses to export, a firm that chooses to set up a plant in the host market has superior information about local market demand. In addition to the well‐known tension between the fixed set‐up costs of investment, the additional variable costs of exports and oligopoly sizes, the incentive to invest abroad is explained by the strategic learning effect. FDI may be observed even if trade costs are zero. The analysis is robust to price competition and to the possibility that a foreign firm can engage in both FDI and exports.     

Developing with Foreign Investment: Malaysia

Abstract
Over the past two decades, there has been a decisive shift in trade and industry policy in developing countries (DCs) away from import substitution and towards export-orientation. As part of this policy shift, an increasing number of DCs have become more receptive to foreign direct investment (FDI). Despite its policy relevance, the literature on the role of FDI in the export expansion of manufactured exports from DCs is sparse. This article attempts to fill this gap through a case study of the role of export-oriented FDI in Malaysia's rapid industrialisation. The overall conclusion of the article is that export-oriented FDI has brought significant returns to Malaysia principally because the general economic climate has been favourable for the internationalisation of production for a considerable period of time.     

Structural transformation and growth of merchandise trade of low-income economies 1980–1992

The Heckscher-Ohlin Vanek theorem, which predicts a direct relationship between exports and greater supply of factors used to produce those exports, performs only 50 percent of the time. However, there is no alternative theory which explains such a relationship. This paper analyzes the growth of merchandise trade of low-income countries, with particular reference to the growth of exports and net exports as these countries move from the predominantly agricultural goods producing era to the manufactured goods producing era. Results suggest, among other things, that industrial structure and governmental policies play an important role in the growth of merchandise trade.     

Foreign direct investment and inequality in developing countries: Does sector matter?

Scholars have studied the relationship between inward foreign direct investment (FDI) and within‐country income inequality in cross‐national contexts, but have not empirically investigated how FDI in different sectors might affect inequality in different ways. We use error correction models to analyze sectoral FDI data compiled from UNCTAD investment reports in 60 middle‐income countries from 1989 to 2010, arguing that FDI in services is more likely to be associated with inequality than FDI in other sectors. We argue that skill biases and changes in employment patterns associated with service sector investments can help explain these findings.     

Foreign entrants and domestic entrepreneurship: Evidence from Vietnam

This paper examines the impacts of foreign entrants and international trade on potential entrants in Vietnam. Based on a discrete entry model, estimates show that foreign direct investment (FDI) stimulates more domestic entrants in the short run, while the aggregate effect of FDI varies across FDI types. Horizontal FDI tends to have no impact on local start‐ups while vertical FDI is found to have a positive impact on the inflow of domestic entry for only the backward linkage and not for the forward linkage. Moreover, industries with more exports accommodate more domestic entrants, whereas imports tend to deter domestic start‐ups.     

Export,FDI and the welfare gains from trade liberalization

This paper extends Melitz and Redding (2015) to analyze the welfare gains from trade liberalization by adding foreign direct investment(FDI). Our model predicts that with FDI activities, welfare gains from trade liberalization will be strictly lower than those in a model without FDI, but only takes exports into account. In addition, the calibrated model indicates that with FDI activities, aggregate welfare reaches its maximum when the fixed export costs are positive rather than 0. Furthermore, we decompose the welfare gains induced by trade liberalization from continuing exporters, and switchers. The results show that in any case, with or without FDI, continuing exporters contribute a larger share to welfare gains than status switching firms.     

外商直接投资与美中贸易逆差的实证研究

This article makes an empirical study on the magnifying effect produced by foreign direct investment (hereafter called as FDI) on the US-China trade deficit through co-integration analysis and error-correction modeling. By combining the empirical results, we give out our own opinion that the expansion of the US-China trade deficit is supposed to partly ascribe to the fact that processed industry is the main path of FDI and to Counter sales and trade diversion which are produced by exports on reproduced production by foreign enterprises in China. On the above-mentioned basis, this article concludes that in order to reduce the US-China trade deficit effectively, we are supposed to expand our domestic demand, perfect our inviting-investment policies, implement FDI in China and quicken up the “going out” of our enterprises.