Export Versus FDI in Services.
In the literature on exports and investment, most productive firms are seen to invest abroad. In the Helpman and others (2004) model, costs of transportation play a critical role in the decision about whether to serve foreign customers by exporting, or by producing abroad. We consider the case of tr...
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| Format: | Journal |
| Language: | English |
| Published: |
Washington, D.C. :
International Monetary Fund,
2010.
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| Series: | IMF Working Papers; Working Paper ;
No. 2010/290 |
| Online Access: | Full text available on IMF |
| Summary: | In the literature on exports and investment, most productive firms are seen to invest abroad. In the Helpman and others (2004) model, costs of transportation play a critical role in the decision about whether to serve foreign customers by exporting, or by producing abroad. We consider the case of tradable services, where the marginal cost of transport is near zero. We argue that in the purchase of services, buyers face uncertainty about product quality, especially when production is located far away. Firm optimisation then leads less productive firms to self-select themselves for FDI. We test this prediction with data from the Indian software industry and find support for it. |
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| Item Description: | <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required |
| Physical Description: | 1 online resource (24 pages) |
| Format: | Mode of access: Internet |
| ISSN: | 1018-5941 |
| Access: | Electronic access restricted to authorized BRAC University faculty, staff and students |