Exports versus FDI in Smith-Motta framework

Authors

  • Andrzej Cieślik University of Warsaw

DOI:

https://doi.org/10.12775/EQUIL.2016.009

Keywords:

exporting, foreign direct investment, proximity-concentration tradeoff

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.

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References

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Published

2016-06-30

How to Cite

Cieślik, A. (2016). Exports versus FDI in Smith-Motta framework. Equilibrium. Quarterly Journal of Economics and Economic Policy, 11(2), 189–218. https://doi.org/10.12775/EQUIL.2016.009

Issue

Section

International economics

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