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Institutional Determinants of Japanese Outward FDI in the Manufacturing Industry

Raphaël Chiappini ()

No 2014-11, GREDEG Working Papers from Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France

Abstract: This paper explores the relationship between six indicators of governance and outward foreign direct investment (FDI) in the Japanese manufacturing industry. We estimate a gravity model of FDI for 30 host countries covering the period 2005-2011, employing Heckman's two-step sample selection correction in order to tackle the issue of zero-value observations. The results indicate that Japanese overseas investments are driven by host market size, yen real exchange rate, macroeconomic stability, resource endowments and policy variables. In particular, we find that confidence societal rules, control of corruption, government effectiveness, political stability and private sector policies are important factors driving FDI.

Keywords: Outward foreign direct investment (FDI); institutions; gravity model; Heckman sample selection model (search for similar items in EconPapers)
JEL-codes: C34 F21 F23 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2014-03
New Economics Papers: this item is included in nep-cse and nep-int
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http://www.gredeg.cnrs.fr/working-papers/GREDEG-WP-2014-11.pdf First version, 2014 (application/pdf)

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