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Spatial effects of foreign direct investment in US states

Eckhardt Bode (), Peter Nunnenkamp and Andreas Waldkirch ()

Canadian Journal of Economics, 2012, vol. 45, issue 1, 16-40

Abstract: This paper estimates the aggregate productivity effects of Marshallian externalities generated by foreign direct investment (FDI) in US states, controlling for Marshallian externalities and other spatial spillovers generated by domestic firms. A regional production function framework models externalities and other spatial spillovers explicitly as determinants of total factor productivity. We employ a system generalized method of moments (GMM) estimator to account for the potential endogeneity of FDI and the presence of spatial lags. Using data for US states from 1977-2003, the results indicate that FDI generates positive externalities, while externalities from domestic firms are negative.

JEL-codes: C31 F21 F23 (search for similar items in EconPapers)
Date: 2012
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Working Paper: Spatial effects of foreign direct investment in US states (2009) Downloads
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