Is Foreign Aid a Vanguard of Foreign Direct Investment? A Gravity-Equation Approach
Hidemi Kimura and
Asia Pacific Economic Papers from Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University
This paper investigates whether and how foreign aid facilitates foreign direct investment (FDI) flows into less developed countries. We employ a large data set of source-recipient country pairs and conduct gravity equation-type estimation. Our empirical methodology enables us to examine an effect through which aid from a donor country promotes FDI from the same donor in particular, which we call a ‘vanguard effect.’ We find that foreign aid in general does not have any significant effect on FDI. However, when we allow for differences in the size of aid effects across donor countries, we find robust evidence that foreign aid from Japan in particular has a vanguard effect, that is, Japanese aid promotes FDI from Japan but does not attract FDI from other countries.
JEL-codes: F21 F35 (search for similar items in EconPapers)
Pages: 38 pages
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed
Downloads: (external link)
Journal Article: Is Foreign Aid a Vanguard of Foreign Direct Investment? A Gravity-Equation Approach (2010)
Working Paper: Is Foreign Aid a Vanguard of Foreign Direct Investment? A Gravity-Equation Approach (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:csg:ajrcau:380
Access Statistics for this paper
More papers in Asia Pacific Economic Papers from Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University Contact information at EDIRC.
Bibliographic data for series maintained by Akira Kinefuchi ( this e-mail address is bad, please contact ).