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Transportation cost and the geography of foreign investment

In: Handbook of International Trade and Transportation

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  • Laura Alfaro
  • Maggie Xiaoyang Chen
Abstract
Falling transportation costs and rapid technological progress have precipitated an explosion of cross-border flows in goods, services, investments, and ideas led by multinational firms. This chapter reviews existing theories and evidence, addressing questions including: How is FDI distributed across space? Why does the law of gravity apply? How do the costs of transporting goods, tasks, and technologies influence firms’ decisions to separate tasks geographically and locate relative to one another? The authors discuss a variety of theoretical mechanisms through which transport cost and other geographic friction influence FDI and present the key empirical studies and findings.

Suggested Citation

  • Laura Alfaro & Maggie Xiaoyang Chen, 2018. "Transportation cost and the geography of foreign investment," Chapters, in: Bruce A. Blonigen & Wesley W. Wilson (ed.), Handbook of International Trade and Transportation, chapter 12, pages 369-406, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:17028_12
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    6. Bartelme, Dominick & Ziv, Oren, 2024. "The internal geography of firms," Journal of International Economics, Elsevier, vol. 148(C).
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