Quantitative Evaluation of Determinants of Export and FDI: Firm-level evidence from Japan

Author Name TODO Yasuyuki  (Faculty Fellow, RIETI)
Creation Date/NO. May 2009 09-E-019
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Notes Revised July 2009


This paper examines determinants of the export and FDI decision, using firm-level data for Japan. The contribution of this paper is twofold. First, this paper employs a mixed logit model to incorporate unobserved firm heterogeneity. Second, special attention is paid to quantitative evaluation of effects of the covariates. We find that the impact of productivity on the export and FDI decision is positive and statistically significant but economically negligible in size, despite the theoretical prediction of recent heterogeneous-firm trade models. The impact of the firm size and information spillovers from experienced neighboring firms in the same industry are also positive but small in size. Quantitatively, the dominant determinants of the export and FDI decision are firms' status on internationalization in the previous year and unobserved firm characteristics. The evidence suggests that entry costs to foreign markets which substantially vary in size across firms play an important role in the export and FDI decision.

Published: Yasuyuki Todo, 2011. "Quantitative Evaluation of Determinants of Export and FDI: Firm-Level Evidence from Japan," The World Economy, Vol. 34(3), pp. 355-381.