Resource title

A Structural Model of Export versus Affiliates Production

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Resource description

We derive and estimate an econometric model of export versus foreign production using firm-level data on foreign activities of German multinationals. Proximity-concentration theory which we derive our model from shows that firms face a trade-off between concentrating their production at home to save on plant set-up costs and producing abroad to save on distance costs. Firms facing this trade-off choose between export and foreign production according to their expected profits. The model is brought to the data using a pooled-probit analysis over the period 1996-1999. We find support for the proximity-concentration trade-off. In particular, market size and distance affect positively the probability of foreign production whereas fixed costs have a negative impact on the decision to engage in FDI.

Resource author

Jörn Kleinert, Farid Toubal

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Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/22088

Resource license

Adapt according to the presented license agreement and reference the original author.