Explaining Domestic Content: Evidence from Japanese and U.S. Auto Production in the U.S.

Swenson, Deborah L.

doi:10.3386/w5495

Cited by 12 publications

(11 citation statements)

References 10 publications

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“…Lipsey and Weiss (1984) further observe that for US companies who produce raw materials and intermediate goods, exports are boosted as a result of overseas investment, whereas for those who produce manufactured goods, there are no significant effects on exports, apart from some weak positive impacts for certain industries. Swenson (1997) finds that after Japanese car manufacturers set up plants in the USA, more automotive parts were imported from Japan rather than bought from local US companies, which supports the theory of Markusen (1995). Head and Ries (2001) also find a complementary relationship between the ODI of Japanese manufacturing firms and their exports.…”

Section: Complementary Effect From Outward Direct Investment To Exportsmentioning

confidence: 50%

Remedy or Poison: Impacts of China's Outward Direct Investment on Its Exports

Liu

Gou

Feng

2015

China and World Economy

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During the past decade, China's outward direct investment (ODI) and exports have experienced rapid growth, drawing increasing attention to the relationship between them. Using the gravity model based on panel data on China 's ODI and trade to 174 countries and regions during 2003 -2012, the present paper investigates the impacts of China 's ODI on exports. We find that China's ODI to a host country significantly promotes China 's trade with that economy: a 10-percent increase in ODI stock can lead to a 2.14-percent increase in exports, a 2.07-percent increase in imports and a 2.87-percent increase in net exports. The scale of the host country's economy, its infrastructure and its distance to China also have significant impacts on China's exports. Therefore, growth in ODI will facilitate China 's trade and integration into the global economy, and enhance industrial upgrading in China by transferring the low-end industries abroad.

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Section: Complementary Effect From Outward Direct Investment To Exportsmentioning

confidence: 50%

Remedy or Poison: Impacts of China's Outward Direct Investment on Its Exports

Liu

Gou

Feng

2015

China and World Economy

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“…Empirical research could also support the complementary impact suggested by research. Swenson (1997) found that once Japan established its own car manufacturing plants in the USA, many more vehicle parts were imported from Japan instead of being purchased from local companies in the US [24], which further augmented the theory of Markusen (1995) [26,27]. Head and Ries (2001) also collaboratively found a harmonizing relationship between foreign trade and OFDI of Japanese manufacturing business ventures [31].…”

Section: Harmonizing Effect From Outward Foreign Direct Investment (Omentioning

confidence: 97%

“…On the other hand, the substitution impact has been supported by empirical studies. Belderbos and Swanson (1998) indicated that investor/business protection initiatives set up by the European Union motivated Japanese companies to establish many manufacturing plants in Europe in the late 1980s, underpinning a remarkable increase of Japanese exported goods to Europe [24]. The substitution impact can be expressed as an export substitution impact and an import transfer impact, both of which show that when OFDI increases, the trade amount decreases.…”

Section: The Flow Of Substitution Impact From Outward Foreign Direct mentioning

confidence: 99%

China’s One Belt and One Road Initiative and Outward Chinese Foreign Direct Investment in Europe

Lei

Ullah

et al. 2019

Sustainability

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For the last few years, the execution of the Belt and Road Initiative (hereinafter referred to as the BRI) and China’s outward foreign direct investment (hereinafter referred to as OFDI) in Europe have seen a significant upward trend. For our current paper, we collected empirical data pertaining to China’s OFDI and foreign trade (gathered from 21 European countries in the trade gravity market for the period 2003 to 2016) that yielded the following results: (a) China’s OFDI to Europe has significantly promoted international trade between China and European countries. On the other hand, OFDI has equally promoted China’s exports to European counties, while it has not encouraged China’s imports from European counties. (b) The Belt and Road Initiative has had a positive impact on China’s exports to European counties and has had a negative impact on China’s imports from European counties. (c) There have been both complementary trade impacts and substitution trade impacts when China has directly invested in European countries, but the complementary impact was much stronger than its substitution impact in the chosen sample period.

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“…The production function for US firms is (4a) while the production function for foreign firms producing in the US is (4b) I assume that the production of foreign and US firms differs in two ways. First, since many authors find that firms exhibit a home bias in their input purchasing patterns (Zeile, 1998;Bergsten and Noland, 1993;Swenson, 1997), I assume that US firms use US-produced inputs more intensively than do foreign firms, which means that g > b.…”

Section: A Model Of Fdi and Importsmentioning

confidence: 99%

Foreign Investment and the Mediation of Trade Flows

Swenson¹

2004

Rev International Economics

111

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How does foreign direct investment affect the trade between nations? While many theories of the multinational firm are based on the premise that foreign production and trade are substitutes, most empirical studies of foreign investment and trade uncover a complementary relationship. This paper shows that the mismatch between theoretical work and empirical findings is a byproduct of data aggregation. When the unique country-industry patterns of mostly OECD country foreign investments in the US are analyzed, predicted substitution patterns are revealed at the data level that roughly corresponds to broad products . The complementary effects of foreign investment on trade emerge at higher levels of aggregation. Copyright Blackwell Publishing Ltd 2004.

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Explaining Domestic Content: Evidence from Japanese and U.S. Auto Production in the U.S.

Abstract: This paper is part of NBER's research program in International Trade and Investment. Any opinions expressed are those of the author and not those of the National Bureau of Economic Research.

Cited by 12 publications

References 10 publications

Remedy or Poison: Impacts of China's Outward Direct Investment on Its Exports

Remedy or Poison: Impacts of China's Outward Direct Investment on Its Exports

China’s One Belt and One Road Initiative and Outward Chinese Foreign Direct Investment in Europe

Foreign Investment and the Mediation of Trade Flows

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