The Effects of Trading Blocs on U.S. Outward FDI Activity: The Role of Extended Market Size

Hyejoon Im (hi6w@ynu.ac.kr)
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Hyejoon Im: Yeungnam University

East Asian Economic Review, 2012, vol. 16, issue 2, 205-225

Abstract: I use panel data of sales by the foreign subsidiaries of the U.S. MNCs to examine whether trading blocs create more or less FDI and the impacts on FDI of the extended market size created by forming blocs. By employing a region-fixed effects model, I find that countries forming trading blocs attract more FDI, particularly from non-member countries, but that FDI does not always increase with the market size of the blocs. As the market size increases, FDI increases only for large blocs. However, these findings are sensitive to model specifications. A policy implication is that a country considering forming or joining a trading bloc with a view to attract FDI may want to form a trading bloc with a country or countries with a large market size.

Keywords: Trading Blocs; Multinational Corporations; Proximity-concentration; Fixed Effects Model (search for similar items in EconPapers)
JEL-codes: C23 F15 F21 F23 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (1)

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