Abstract
The purpose of this paper is to present a simple model, based on profit-maximizing behavior, that can be used to derive estimable equations for U.S. foreign direct investment in manufacturing. Our estimation of foreign-investment equations requires estimates of production functions for U.S. manufacturing subsidiaries abroad. Specifically, I estimate the production function to be a constant-returns-to-scale, homogeneous, transcendental logarithmic function. I also present evidence in the form of my estimated foreign-direct-investment equation that domestic and foreign markets may be imperfectly competitive.
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