Atlantic Economic Journal

, Volume 29, Issue 4, pp 420–437 | Cite as

The complementarity between U.S. foreign direct investment stock and trade

  • W. Hejazi
  • A. E. Safarian


Within a gravity model framework, this paper will establish that trade and foreign direct investment (FDI) are complementary, using trade and FDI stock data on a bilateral basis between the U.S. and 51 other countries over the period 1982 to 1994. U.S. outward FDI is found to have a larger predicted impact on U.S. exports than does inward FDI. On the other hand, inward FDI is found to have a larger predicted impact on U.S. imports than does U.S. outward FDI. These results are directly linked to patterns of intrafirm trade within the multinational enterprise (MNE), a result consistent with the transactions cost theory of MNEs. In addition, a sectoral analysis indicates that U.S. outward FDI in manufacturing has a large predicted impact on both exports and imports, whereas U.S. outward FDI in services has a large predicted impact on U.S. exports but little or no predicted impact on imports.


Foreign Direct Investment Transaction Cost International Economic Public Finance Model Framework 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


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Copyright information

© International Atlantic Economic Society 2001

Authors and Affiliations

  • W. Hejazi
    • 1
  • A. E. Safarian
    • 1
  1. 1.University of TorontoCanada

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