ABSTRACT
While much work speculates on the possibility of ties between trade and investment, little work has examined how the type of foreign investment affects trade flows. One of the few papers on this topic is Yamawaki (1991). Yamawaki examines how Japanese investment in distribution, as measured by workers employed in the distribution sector, affects Japanese exports. Yamawaki uses a framework that recognizes the simultaneity between trade and investment, and discovers that distribution investments do affect the level of trade. This paper also explores the importance of distribution efforts, which I call ‘trade sector’ foreign investment, but will also examine the linkage effects that are associated with foreign investment types considering those in the manufacturing, service, and resource areas.
