Author : Yong Joon Jang
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (137 download)
Book Synopsis Comparative Advantage, Outward Foreign Direct Investment and Average Industry Productivity by : Yong Joon Jang
Download or read book Comparative Advantage, Outward Foreign Direct Investment and Average Industry Productivity written by Yong Joon Jang and published by . This book was released on 2017 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we explicitly address the role of comparative advantage in effects of outward FDI on domestic productivity, both theoretically and empirically. In the theoretical framework, we place Irarrazabal, Moxnes and Opromolla's (2009) outward FDI model into Bernard, Redding and Schott's (2007) framework of international trade with heterogeneous monopolistically competitive firms and comparative advantage; and show that ex ante high average industry productivity triggered by firm self-selection enhances ex post average industry productivity during the process of increase in FDI. Using Korean industry-level data from 1992 to 2008, we also empirically test our theoretical predictions using the fixed effect model as a benchmark model, followed by system GMM estimation methods for sensitivity analysis. Our empirical findings suggest that Korean outward FDI is positively correlated with domestic productivity and this link is likely to take place in those sectors above median competitiveness measured as export-based RCA (Revealed Comparative Advantage). Thus, we find that the empirical results were consistent with previous theoretical predictions as well as our analysis.