Investment Liberalization and International Trade

37 Pages Posted: 20 Sep 2002

See all articles by Mary Amiti

Mary Amiti

International Monetary Fund (IMF) - Trade Unit; University of Melbourne - Department of Economics; Centre for Economic Policy Research (CEPR)

Katharine Wakelin

University of Nottingham - School of Economics

Date Written: August 2002

Abstract

This Paper estimates the cross-price elasticity of exports with respect to investment costs for bilateral relations between 36 countries. We show that the effect of reducing foreign direct investment costs on exports depends on country characteristics and trade costs as predicted by the Markusen (1997, 2002) model. When countries differ in relative factor endowments and trade costs are low, investment liberalization stimulates exports, whereas when countries are similar in terms of relative factor endowments and size, and trade costs are moderate to high, investment liberalization reduces exports.

Keywords: Exports, foreign direct investment, international trade, investment costs, investment liberalization

JEL Classification: F12, F14, F23

Suggested Citation

Amiti, Mary and Wakelin, Katharine, Investment Liberalization and International Trade (August 2002). CEPR Discussion Paper No. 3492. Available at SSRN: https://ssrn.com/abstract=331523

Mary Amiti (Contact Author)

International Monetary Fund (IMF) - Trade Unit ( email )

700 19th Street NW
Washington, DC 20431
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202-986-3572 (Phone)
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University of Melbourne - Department of Economics ( email )

Melbourne, 3010
Australia
+61 3 8344 7652 (Phone)
+61 3 8344 6899 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Katharine Wakelin

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom
+44 115 951 4734 (Phone)
+44 115 951 4159 (Fax)

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