Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/128714
Authors: 
Egger, Peter
Pfaffermayr, Michael
Year of Publication: 
2001
Series/Report no.: 
WIFO Working Papers 164
Abstract: 
This paper analyzes the effects of distance as a common determinant of exports and FDI in a three factors New Trade Theory model assuming that distance affects both pure trade costs and plant set-up costs. Exports and FDI are not necessarily substitutes with respect to distance since the predicted sign depends on its importance for fixed plant set-up costs relative to transportation costs. For the empirical specification, we suggest that the impact of of time-invariant variables such as distance is most appropriately analyzed in a Hausman-Taylor SUR model. In our application, outward FDI is negatively affected by distance while its effect on exports is insignificant. Exports and outward FDI are complementary with respect to the time-invariant unobserved factors and also with respect to the majority of the exogenous observed determinants.
Subjects: 
Multinationals
New trade theory
Panel econometrics
JEL: 
C33
F12
F23
Document Type: 
Working Paper

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