The Real Exchange Rate and Foreign Direct Investment in the United States: Relative Wealth vs. Relative Wage Effects

Michael Klein and Eric Rosengren ()

No 4192, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: There has been a significant correlation between United States inward foreign direct investment and the United States real exchange rate since the 1970s. Two alternative reasons for this relationship are that the real exchange rate affects the relative cost of labor and that the real exchange rate alters relative wealth across countries. In this paper we explore these alternatives by examining the determinants of four measures of inward foreign direct investment to the United States from seven industrial countries over the period 1979 to 1991. We find strong evidence that relative wealth significantly affects U.S. inward foreign direct investment. We find no evidence that relative wages have a significant impact on the determination of U.S. foreign direct investment. These results are robust to the choice of countries in our sample and when controlling for changes in tax codes.

Date: 1992-10
Note: ITI IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Published as Journal of International Economics, vol. 36, no. 3/4, May 1994, p. 373

Downloads: (external link)
http://www.nber.org/papers/w4192.pdf (application/pdf)

Related works:
Journal Article: The real exchange rate and foreign direct investment in the United States: Relative wealth vs. relative wage effects (1994)
Working Paper: The real exchange rate and foreign direct investment in the United States: relative wealth vs. relative wage effects (1992)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:4192

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w4192

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().