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Is the relationship between foreign direct investment and trade different across developed and developing countries? Evidence from Korea
Author(s) -
Kang Kichun
Publication year - 2012
Publication title -
asian‐pacific economic literature
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.232
H-Index - 21
eISSN - 1467-8411
pISSN - 0818-9935
DOI - 10.1111/j.1467-8411.2012.01343.x
Subject(s) - foreign direct investment , developing country , international economics , pooling , economics , developed country , international trade , business , investment (military) , macroeconomics , economic growth , political science , population , demography , artificial intelligence , sociology , politics , computer science , law
Empirical studies that pool data from developed and developing countries may conflate the separate roles played. The pooled coefficient estimates may significantly misrepresent the true relationships. This paper analyses the impact of outward and inward foreign direct investment (FDI) flows between Korea and developed and developing countries on Korean exports in 12 manufacturing sectors over the 1988–2006 period. The evidence suggests that the outward FDI to developing countries is likely to increase Korean exports to those countries than FDI to developed countries likely to increase exports to developed countries. Thus, pooling investment flows can lead to incorrect inferences.