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The impact of free trade agreements on foreign direct investment : The case of Korea

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  • The impact of free trade agreements on foreign direct investment
  • Bae, Chankwon; Jang, Yong Joon
  • Korea Institute for International Economic Policy


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Title The impact of free trade agreements on foreign direct investment
Similar Titles
Sub Title

The case of Korea

Material Type Articles
Author(English)

Bae, Chankwon; Jang, Yong Joon

Publisher

Seoul:Korea Institute for International Economic Policy

Date 2013-12
Journal Title; Vol./Issue Journal of East Asian Economic Integration:vol. 17(no. 4)
Pages 28
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Trade
Economy < Direct Investment
Holding KIEP

Abstract

This paper aims to empirically identify the effects of FTAs on outward and inward FDIs in Korea. Considering the income differences between Korea and its FTA partners, we hypothesize that FTAs have a positive effect on outward FDI to developing countries and inward FDI from developed countries. An underlying source of the hypothesis is the Knowledge-Capital model, addressing the positive (negative) relationship between trade costs and horizontal (vertical) FDI. We test for the hypothesis using data on Korea’s FTAs and FDI over the period 2000-2010. We find that our empirical results support the hypothesis, and additionally, FTAs in general encourage FDI by creating an FDI-friendly environment. (The rest omitted)