2014 Fiscal Year Final Research Report
Heterogeneous Impact of Trade Liberalization on Vertical FDI: Evidence from Japanese firm-level data
| Project/Area Number |
23730249
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| Research Category |
Grant-in-Aid for Young Scientists (B)
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| Allocation Type | Multi-year Fund |
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| Research Field |
Applied economics
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| Research Institution | Keio University |
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Principal Investigator |
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| Project Period (FY) |
2011 – 2014
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| Keywords | 貿易自由化 / 経済政策 / 海外直接投資 / 生産性 |
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| Outline of Final Research Achievements |
This paper empirically explores the reason why a recent surge of foreign direct investment (FDI) to developing countries has been mainly driven by less productive firms. To this end, we present a simple model of FDI with vertical division of labor in a heterogeneous firm framework. From a theoretical point of view, in countries with low unskilled worker wages and low trade costs, firms with high productivity invest abroad and engage in international division of labor. Moreover, if trade costs have further reduced, the productivity cut-off level becomes lower and firms within the middle range of productivity will start investing in low wage countries. Our empirical analysis using logit estimation or a multinomial logit model of Japanese firms' FDI choices reveals that a reduction in tariff rates attracts even less productive vertical foreign direct investment (VFDI) firms. This result is consistent with a different definition of VFDI.
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| Free Research Field |
国際経済学
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