Export-Platform Foreign Direct Investment
Abstract
A poorly understood empirical phenomenon is export-platform affiliate production (EP), particularly for sale in third countries rather than in the parent or host countries. We develop a three-region model, with two identical large, high-cost countries (collectively called North) and a small, low-cost country (South). The large countries each have one firm. Our theory section analyzes the conditions under which one or both of these firms uses the South to produce for (a) export back to the parent (home-country EP), (b) export to the other large country (third-country EP), or (c) export to both (global EP). A free-trade area between one of the northern countries and South can lead to the insider northern firm choosing home or global EP and the outsider firm choosing third-country EP for a range of parameter values. Our empirical section shows the relevance of this outcome. Foreign manufacturing affiliates of US multinationals inside North America concentrate on home-country EP while affiliates inside Europe concentrate on third-country EP.
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The paper's findings illustrate relocation of production to third markets as export platforms in response to bilateral tariff changes.
“Consistent with the predictions of models of export platform FDI (e.g., Yeaple 2003; Ekholm, Forslid and Markusen 2007; Tintelnot 2017), our findings illustrate the relocation of production to third markets as export platforms in response to bilateral tariff changes.”
From The Production Relocation and Price Effects of US Trade Policy: The Case of Washing Machines (2020) · cites this paper as Ekholm, Forslid and Markusen 2007
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The Production Relocation and Price Effects of US Trade Policy: The Case of Washing Machines
Flaaen, A., Hortaçsu, A., & Tintelnot, F. (2020) · American Economic Review · doi:10.1257/aer.20190611 · Cited by 287 · see citing works
- Authors
- Ekholm, K., Forslid, R., & Markusen, J. R.
- Affiliations
- Stockholm University (SE)
- University College Dublin (IE)
- Venue
- Journal of the European Economic Association
- Publisher
- Oxford University Press (OUP)
- Published
- 2007-06-01
- Volume
- 5
- Issue
- 4
- Pages
- 776-795
- ISSN
- 1542-4766 (ISSN-L)
- 1542-4774
- OpenAlex
- W3124985739
- Cited by
- 626
- References
- 0
- Citations by year
- 2026: 13 · 2025: 13 · 2024: 18 · 2023: 18 · 2022: 28 · 2021: 15 · 2020: 21 · 2019: 22 · 2018: 24 · 2017: 43 · 2016: 45 · 2015: 33 · 2014: 40 · 2013: 44 · 2012: 47
- FWCI
- 84.96
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- Journal of the European Economic Association (publishedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Global trade and economics
- Social Sciences › Business, Management and Accounting › Strategy and Management › International Business and FDI
- Social Sciences › Business, Management and Accounting › Strategy and Management › Global trade, sustainability, and social impact
- Keywords
- multinational corporations, free trade area, three-region model, US multinationals, North America, Europe
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