EXPORTS VERSUS FDI IN SMITH-MOTTA FRAMEWORK
EXPORTS VERSUS FDI IN SMITH-MOTTA FRAMEWORK
Author(s): Andrzej CieślikSubject(s): Economy, Supranational / Global Economy
Published by: Instytut Badań Gospodarczych
Keywords: exporting; foreign direct investment; proximity-concentration tradeoff
Summary/Abstract: In this paper we study the choice between exporting and foreign direct investment (FDI) in the Smith-Motta duopoly framework. First, we identify the conditions necessary for exporting and FDI, depending on the costs of exporting and the cost of foreign investment. Then, we discuss various proximity-concentration tradeoffs. Finally, we demonstrate that six possible types of equilibriums may emerge depending on various combinations of the key parameters of the model. These equilibriums include: a monopoly FDI equilibrium, a monopoly exporting equilibrium, a domestic monopoly equilibrium, a duopoly FDI equilibrium, a duopoly exporting equilibrium, and no entry equilibrium.
Journal: Equilibrium. Quarterly Journal of Economics and Economic Policy
- Issue Year: 11/2016
- Issue No: 2
- Page Range: 189-218
- Page Count: 30
- Language: English