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Determinants of Foreign Direct Investment

Bruce Blonigen and Jeremy Piger ()

No 16704, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Empirical studies of bilateral foreign direct investment (FDI) activity show substantial differences in specifications with little agreement on the set of covariates that are (or should be) included. We use Bayesian statistical techniques that allow one to select from a large set of candidates those variables most likely to be determinants of FDI activity. The variables with consistently high inclusion probabilities are traditional gravity variables, cultural distance factors, parent-country per capita GDP, relative labor endowments, and regional trade agreements. Variables with little support for inclusion are multilateral trade openness, host country business costs, host-country infrastructure (including credit markets), and host-country institutions. Of particular note, our results suggest that many covariates found significant by previous studies are not robust.

JEL-codes: C52 F21 F23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ifn and nep-int
Date: 2011-01
Note: ITI
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Published as Modeling Processor Market Power and the Incidence of Agricultural Policy: A Nonparametric Approach , Rachael E. Goodhue, Carlo Russo. in The Intended and Unintended Effects of U.S. Agricultural and Biotechnology Policies , Graff Zivin and Perloff. 2012
Published as Bruce A. Blonigen & Jeremy Piger, 2014. "Determinants of foreign direct investment," Canadian Journal of Economics, Canadian Economics Association, vol. 47(3), pages 775-812, August.

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