International Trade and Factor Mobility: An Empirical Investigation

31 Pages Posted: 24 Sep 1999

See all articles by Linda S. Goldberg

Linda S. Goldberg

Federal Reserve Bank of New York; National Bureau of Economic Research (NBER)

Michael W. Klein

Tufts University - The Fletcher School of Law and Diplomacy; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: June 1999

Abstract

Foreign Direct Investment (FDI) has been growing rapidly, at a pace far exceeding the growth in international trade. Thus, a full understanding of the relationship between trade in goods and FDI is important for obtaining a complete picture of the extent and sources of international linkages. We investigate whether FDI serves as a complement to trade or a substitute for trade based on the effects identified by the Rybczynski theorem whereby an increase in a factor of production used intensively in one sector affects production both in that sector and in other sectors. Using detailed data on bilateral capital and trade flows between the United States and individual Latin American countries, we examine the linkages between FDI into particular sectors of Latin American economies and the net exports of those and other manufacturing sectors. We find that FDI from the United States can lead to significant, and varied, shifts in the composition of activity in many Latin American countries and across many manufacturing industries.

JEL Classification: F31, F3, F4

Suggested Citation

Goldberg, Linda S. and Klein, Michael W., International Trade and Factor Mobility: An Empirical Investigation (June 1999). FRB of New York Staff Report No. 81. Available at SSRN: https://ssrn.com/abstract=171077 or http://dx.doi.org/10.2139/ssrn.171077

Linda S. Goldberg (Contact Author)

Federal Reserve Bank of New York ( email )

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New York, NY 10045
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National Bureau of Economic Research (NBER)

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Michael W. Klein

Tufts University - The Fletcher School of Law and Diplomacy ( email )

Medford, MA 02155
United States
617-627-2718 (Phone)
617-627-3712 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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