This paper builds a multi-country, multi-sector general equilibrium model that explains the decision of heterogeneous firms to serve foreign markets either through exports or local subsidiary sales FDI. These modes of market access involve different relative costs, some of which are sunk while others vary with sales volume such as transport costs and tariffs. Relative to investment in a subsidiary, exporting involves lower sunk costs but higher per-unit costs. In equilibrium, only the more productive firms choose to serve the foreign markets and the most productive among this group will further choose to serve the overseas market via FDI. The paper then explores several implications of the individual firms' decisions for aggregate export and FDI sales relative to the domestic and foreign market sizes. In particular, it is shown that firm level heterogeneity is an important determinant of relative export and FDI flows.
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As the access to this document is restricted, you may want to look for a different version below or search for a different version of it. Andrew B. Census Bureau. Ethier, Wilfred J. Wilfred J. Markusen, Ethier, W.
Lael Brainard, Yeaple, Discussion Papers. James R. Markusen, James R. Wright, Marc J. Melitz, Mark J. Melitz, Marc J, Robert C. Feenstra, John W. Slaughter, "undated". Slaughter, Ethier, Helpman, Elhanan, Norback, Pehr-Johan, Mark E. Bradford Jensen, You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aecrev:vyip See general information about how to correct material in RePEc.
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Economic literature: papers , articles , software , chapters , books. FRED data. Melitz Stephen R. Registered: Elhanan Helpman Marc J. Melitz Stephen Ross Yeaple. Corrections All material on this site has been provided by the respective publishers and authors. Louis Fed. Help us Corrections Found an error or omission?
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Export Versus FDI with Heterogeneous Firms
Export versus FDI with heterogeneous firms