Japanese and U.S. Exports and Investment as Conduits of Growth

31 Pages Posted: 23 Apr 1998 Last revised: 9 May 2000

See all articles by Jonathan Eaton

Jonathan Eaton

Leonard N. Stern School of Business - Department of Economics; National Bureau of Economic Research (NBER)

Akiko Tamura

Akita University - Department of Environmental Health Sciences

Date Written: February 1996

Abstract

We develop a simple model of the choice between exploiting a technology in another country via export and via direct foreign investment. The model points to the destination country's size, level of technological sophistication, and distance from the source as factors in the decision. Moreover, it suggests that the effects of these variables may not only be nonhomogeneous but nonmonotonic as well. We use the model as a basis for estimating Japanese and U.S. exports and DFI positions around the world. Consistent with the theory we find that the importance of DFI relative to exports grows with population, although, contrary to our theory, the elasticity of DFI, as well as exports, with respect to population is less than one. We find that distance tends to inhibit DFI much less than it inhibits exports, as our theory predicts. We find some tendency for Japanese exports to rise relative to DFI as countries become more advanced with U.S. exports and DFI exhibiting the opposite tendency. Taking population, per capita income, factor endowments, and distance into account, we find Japan to be more open to U.S. exports than any region in the world except East Asia.

Suggested Citation

Eaton, Jonathan and Tamura, Akiko, Japanese and U.S. Exports and Investment as Conduits of Growth (February 1996). NBER Working Paper No. w5457. Available at SSRN: https://ssrn.com/abstract=4155

Jonathan Eaton (Contact Author)

Leonard N. Stern School of Business - Department of Economics ( email )

269 Mercer Street
New York, NY 10003
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212-998-8951 (Phone)
212-995-3932 (Fax)

HOME PAGE: http://www.econ.nyu.edu/user/eatonj/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Akiko Tamura

Akita University - Department of Environmental Health Sciences

School of Medicine
1-1-1 Hondo
Akita City, 010-8543
Japan

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