The Economics of Foreign Direct Investment and Trade with an Application to the U.S. Food Processing Industry

11 Pages Posted: 31 Mar 2020

See all articles by Munisamy Gopinath

Munisamy Gopinath

Oregon State University - Department of Applied Economics

Daniel Pick

affiliation not provided to SSRN

Utpal Vasavada

affiliation not provided to SSRN

Date Written: May 1999

Abstract

This article investigates the determinants of foreign direct investment and its relationship to trade in the U.S. food industry. A multinational corporation maximizes profits by choosing between production at home, which is exported, and production in a host country. This introduces the possibility that foreign affiliate sales can substitute and/or complement exports. The empirical framework consists of a four‐equations system with foreign affiliate sales, exports, affiliate employment, and FDI as endogenous variables. The results confirm small substitution between foreign sales and exports, and that the host country's protection policies affect the decision to invest abroad.

Keywords: export, foreign affiliate sales, foreign direct investment, multinational corporation, F210, F230, L660

Suggested Citation

Gopinath, Munisamy and Pick, Daniel and Vasavada, Utpal, The Economics of Foreign Direct Investment and Trade with an Application to the U.S. Food Processing Industry (May 1999). American Journal of Agricultural Economics, Vol. 81, Issue 2, pp. 442-452, 1999, Available at SSRN: https://ssrn.com/abstract=3564531 or http://dx.doi.org/10.2307/1244593

Munisamy Gopinath (Contact Author)

Oregon State University - Department of Applied Economics ( email )

213 Ballard Extension Hall
Corvallis, OR 97331-4501
United States
541-737-1402 (Phone)
541-737-2563 (Fax)

Daniel Pick

affiliation not provided to SSRN

No Address Available

Utpal Vasavada

affiliation not provided to SSRN

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