Catherine Y. Co

"Trade, Foreign Direct Investments and Industry Performance "
JEL codes: L60, F23, C30

Abstract: This paper investigates the U.S. margins effects of imports and FDI using a panel of 448 four-digit SIC manufacturing industries for 1982-1990. In a single equation two-way fixed effects model, imports are found to have a larger competitive effect in industries that need disciplining; greenfield FDI does not seem to have a significant impact but other types of FDI produce significant positive effects on margins. When variable endogeneity are taken into account, both types of FDI significantly affect margins. Margins initially rise then fall after some lag. The positive impact on margins could be attributed to foreign firms introducing more cost effective techniques themselves and/or bringing about their adoption.