%0 Report
%9 EIC working paper series
%A Metulini, Rodolfo
%A Riccaboni, Massimo
%A Sgrignoli, Paolo
%A Zhu, Zhen
%D 2017
%F eprints:3660
%I IMT Institute for Advanced Studies Lucca
%K Keywords: Networks; Foreign direct investment; Corporate control  -    JEL classification: C21; F10; F14; F23; L22
%N 4
%T The Indirect Effects of FDI on Trade: A Network Perspective
%U http://eprints.imtlucca.it/3660/
%X The relationship between international trade and foreign direct invest-  ment (FDI) is one of the main features of globalization. In this paper  we investigate the effects of FDI on trade from a network perspective,  since FDI takes not only direct but also indirect channels from origin to  destination countries because of firms' incentive to reduce tax burden,  to minimize coordination costs, and to break barriers to market entry.  We use a unique data set of international corporate control as a measure  of stock FDI to construct a corporate control network (CCN) where the  nodes are the countries and the edges are the corporate control relation-  ships. Based on the CCN, the network measures, i.e., the shortest path  length and the communicability, are computed to capture the indirect  channel of FDI. Empirically we find that corporate control has a positive  effect on trade both directly and indirectly. The result is robust with dif-  ferent specifications and estimation strategies. Hence, our paper provides  strong empirical evidence of the indirect effects of FDI on trade. More-  over, we identify a number of interplaying factors such as regional trade  agreements and the region of Asia. We also find that the indirect effects  are more pronounced for manufacturing sectors than for primary sectors  such as oil extraction and agriculture.