The impact of foreign direct investment on horizontal export diversification: Empirical evidence

Bedassa Tadesse, Elias K. Shukralla

Research output: Contribution to journalArticlepeer-review

9 Scopus citations

Abstract

Using data on stocks of Foreign Direct Investment (FDI) from 131 countries spanning the years 1984 to 2004 and the number of products exported by each country, we examine the effect of FDI on horizontal export diversification. To quantify the effects, we utilize parametric (quantile) and semi-parametric econometric methods. Results from both approaches indicate that, in general, an increase in the stock of FDI enhances the horizontal diversification of exports. The actual magnitude of the effect however, varies greatly across countries depending on the existing stock of FDI and stage of diversification, giving rise to an almost inverted U-shaped relationship. A further look at our results provides useful insights on the circumstances under which FDI may aid or inhibit the horizontal expansion of exports.

Original languageEnglish (US)
Pages (from-to)141-159
Number of pages19
JournalApplied Economics
Volume45
Issue number2
DOIs
StatePublished - Jan 1 2013

Keywords

  • Export diversification
  • Foreign direct investment
  • Nonparametric estimation
  • Quantile regression

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