Does Foreign Direct Investment Promote Regional Development in Developed Countries? A Markov Chain Approach for US States

Eckhardt Bode () and Peter Nunnenkamp

Kiel Working Papers from Kiel Institute for the World Economy

Abstract: This paper investigates the effects of inward FDI on per-capita income and growth of the US states since the mid-1970s. Using a Markov chain approach, it shows that both quantitative and qualitative characteristics of FDI affect per-capita income and growth. Employment-intensive FDI, concentrated in richer states, has been conducive to income growth, while capital-intensive FDI, concentrated in poorer states, has not. FDI has consequently tended to slow down rather than foster income convergence among US states. It appears to be less important whether FDI has been undertaken in the manufacturing sector of US states or in other sectors.

Keywords: Markov transition probability; likelihood ratio test; FDI; per-capita income; regional development; United States of America (search for similar items in EconPapers)
JEL-codes: F23 O18 O51 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-geo
Date: 2007-08
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Persistent link: http://EconPapers.repec.org/RePEc:kie:kieliw:1374

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