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Determinants of FDI for Spanish regions: Evidence using stock data

Mariam Camarero (), Laura Montolio and Cecilio Tamarit
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Laura Montolio: University of Valencia, Department of Applied Economics II, Av. dels Tarongers, s/n Eastern Department Building E-46022 Valencia, Spain

No 1809, Working Papers from Department of Applied Economics II, Universidad de Valencia

Abstract: After two decades of academic debate on the factors that determine FDI, the discussion still remains open. This article empirically investigates the determinants of FDI activity from a macroeconomic point of view, using Spanish regional data (NUTS 2) for the period 2004-2013. We apply the Poisson Pseudo-Maximum-Likelihood estimator with country-origin fixed effects in a gravity framework. The empirical analysis revealed the following allocation patterns: FDI locational strategies in the Spanish regions are determined significantly by the economic potential and competitiveness of the regions and, in a lesser extent, by the productive capacity. We also confirm the adequacy of using the stock of FDI and obtain an improved specification of the model compared to previous empirical literature based on FDI flows. The results allow us to draw some policy implications about the prospective promotion of incoming FDI at the subnational level.

Keywords: Foreign Direct Investment determinants; PPML; Gravity model; Spanish regions (search for similar items in EconPapers)
JEL-codes: F21 R12 C23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-geo and nep-int
Date: 2018-07
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ftp://147.156.210.157/RePEc/pdf/eec_1809.pdf First version, 2018 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:eec:wpaper:1809

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