The Geographic Distribution of Economic Activities of the USA Multinational Enterprises

DEGIT Conference Papers from DEGIT, Dynamics, Economic Growth, and International Trade

Abstract: This paper examines empirically a range of theoretical hypotheses about the determinants of FDI location in a panel data regression framework. The results of the estimation of a gravity model lend support to the proximity-concentration and internalisation hypotheses. Also, the fact that FDI has been found to be decreasing in the competition posed by alternative locations is suggestive of the superiority of the share version of the gravity model over its classical formulation. A panel data cointegration-type analysis between FDI and GDP, and per capita income differential suggests that GDP has a positive impact on FDI, but provide mixed evidence as to whether per capita income differential reflects demand or supply determinants of FDI. Causality tests between income, income differential and FDI points to FDI playing a positive role on economic growth and convergence.

Keywords: Foreign direct investment; multinational enterprises; gravity model; dynamic panel data model; panel data cointegration (search for similar items in EconPapers)
JEL-codes: C23 F21 F23 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2006-06
New Economics Papers: this item is included in nep-geo
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