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Foreign direct investment in provinces: A spatial regression approach to FDI in Vietnam

Bulent Esiyok and Mehmet Ugur ()

MPRA Paper from University Library of Munich, Germany

Abstract: Foreign direct investment (FDI) flows into Vietnam have increased significantly in recent years, with unequal distribution between provinces and regions. We aim to contribute to the literature on locational determinants of FDI by accounting for spatial interdependence between 62 Vietnamese provinces from 2006-2009. For this purpose, we estimate a spatial lag model using maximum likelihood estimation method. We report existence of spatial dependence between provinces as well as spatial spill-over effects. The results are robust to different specifications for weight matrices and inclusion of different explanatory variables and/or proxies. We also report that conventional determinants of FDI such as market size, domestic investment, openness to trade, labour cost, education and governance, etc. are significant and remain robust to inclusion of spatial interdependence. The sign of the spatial dependence suggests that the distribution of FDI between provinces is subject to conglomeration effects.

Keywords: Foreign direct investment; spatial dependence; conglomeration; Vietnam (search for similar items in EconPapers)
JEL-codes: R12 F21 C31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cwa, nep-dev, nep-geo, nep-int, nep-pbe and nep-tra
Date: 2011-12-20, Revised 2012-01-05
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Working Paper: Foreign direct investment in provinces: A spatial regression approach to FDI in Vietnam (2011) Downloads
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