NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

In Search of Substitution Between Foreign Production and Exports

Bruce A. Blonigen

NBER Working Paper No. 7154
Issued in June 1999
NBER Program(s):   ITI

Are foreign production and exports substitutes or complements? The continuing globalization of production makes the question of the relationship between trade and foreign direct investment ever more important. Standard theory of the multinational corporation (MNC) assumes substitution, while previous empirical work examining the relationship has generally found strong evidence of complementarity. This study examines product-level data, which more closely fits the assumption of a single-product firm often used in MNC theory, and finds substantial evidence for both a substitution and a complementarity effect between affiliate production and exports with Japanese automobile parts for the U.S. market. I also test for and find evidence of substitution using product-level data on a set of Japanese-produced final consumer goods. Thus, product-level data allows one to separately identify substitution from complementarity effects (here from vertical production relationships), rather than try to infer them from estimates using more aggregate data. In this sense, the paper highlights the importance of matching the level of data aggregation with the hypotheses being tested. This is particularly true at a time when there is an increasing proliferation of available microeconomic data in the field of international economics.

download in pdf format
   (448 K)

email paper

This paper is available as PDF (448 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w7154

Published: Blonigen, Bruce A. "In Search Of Substitution Between Foreign Production And Exports," Journal of International Economics, 2001, v53(1,Feb), 81-104.

Users who downloaded this paper also downloaded these:
Brainard w4269 A Simple Theory of Multinational Corporations and Trade with a Trade-Off Between Proximity and Concentration
Lipsey, Ramstetter, and Blomstrom w7623 Outward FDI and Parent Exports and Employment: Japan, the United States, and Sweden
Brainard w4580 An Empirical Assessment of the Proximity-Concentration Tradeoff between Multinational Sales and Trade
Helpman w12091 Trade, FDI, and the Organization of Firms
Blonigen w11299 A Review of the Empirical Literature on FDI Determinants
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us