short run strategies for attracting foreign direct investment this paper empirically investigates the effectiveness and feasibility of two fdi policies fiscal incentives and deregulation aimed at improving the attractiveness of a country in the short run using disaggregated data on sales by us mnes foreign affiliates in 43 developed and developing countries over the 1982 94 period results show that the provision of fiscal incentives or the deregulation of the labour market would exert a positive impact on total fdi given the drawbacks frequently associated with the use of incentive packages economy wide policies which ease firing procedures and reduce severance payments would certainly be the best policy option this paper also highlights the different aggregation and omitted variable biases that have affected results of previous studies and provides some support to recent theoretical models of fdi by showing that third country effects and spatial interdependence influence respectively the location of export platform fdi and vertical fdi

factors determining the location decisions of spanish mnes an analysis based on the investment development path on the basis of theoretical assumptions approached via the investment development path idp this study examines the most important factors for and against the location decisions in foreign direct investment taken by multinational enterprises considering host countries at very different stages of economic development latin american and european union countries we carry out different kinds of analysis on a sample of 103 firms belonging to a medium sized country that has recently achieved the status of developed country the results reveal that the importance that home country firm managers give to diverse location factors depends to a certain extent on the stage that each group of host countries has reached in the idp in line with prior research we find that firm managers consider mainly the group of factors associated with strategic asset seeking when deciding to locate their investments in the group of more developed countries european union in contrast our results show that when these firm managers choose the group of less developed countries latin america social and cultural factors play a more determinant role thus suggesting the importance of historical and cultural ties between the home and host countries

the effect of environmental regulation on the locational choice of japanese foreign direct investment this article assesses the impact of environmental regulation er in host countries on japanese foreign direct investment fdi decision making it tests the pollution haven hypothesis using data on national er standards and japanese inward fdi in five dirty industries iron and steel industry nonferrous metals industry chemicals industry paper and pulp industry nonmetallic products industry the results do not support the pollution hypothesis on the contrary inward japanese fdi appears to be attracted to countries which have committed themselves to a transparent and stable environment regulatory environment suggesting that the quality of the regulatory framework in terms of its certainty and transparency has a greater influence on foreign investors choice of location than the level of environmental regulatory measures

estimation of an occupational choice model when occupations are misclassified this paper examines occupational choices using a discrete choice model that accounts for the fact that self reported occupation data is measured with error despite evidence from validation studies which suggests that there is a substantial amount of measurement error in self reported occupations existing research has not corrected for classi cation error when estimating models of occupational choice this paper develops a panel data model of occupational choices that corrects for misclassi cation in occupational choices and measurement error in occupation speci c work experience variables the model is used to estimate the extent of measurement error in self reported occupation data and quantify the bias that results from ignoring measurement error in occupation codes when

real exchange rates and relative prices an empirical investigation abstract this paper uncovers a striking empirical regularity the consumer price of a good relative to a different good within a country tends to be much less variable than the price of that good relative to a similar good in another country this fact seems to hold for all goods except very simple homogeneous products models of real exchange rates are likely to have predictions regarding this relation so this fact may provide a useful gauge for discriminating among models

political risk institutions and foreign direct investment how do they relate in various european countries this paper examines theoretically and empirically the extent to which the decision by foreign firms to invest in a group of countries is influenced by economic factors as opposed to political risk and institutional performance we consider the importance of these factors as drivers of foreign direct investment fdi for 32 european countries subsequently divided into three pooled clusters by means of panel regression techniques in two specifications over the 1995 2008 period our results suggest that risk and institutional factors considered in both static and dynamic perspectives significantly influence the behaviour of investors policies and institutions that vary widely between countries modify their decision making so that the purely economic factors have different statistical significance and impacts on the intensity of fdi as was revealed by clustering countries into three groups according to levels of economic maturity additionally not all factors of risk have an identical impact on fdi decisions in particular groups of countries however we find that as measures of political risk monetary discipline low regulation effective government and good education prove to be highly significant for most country groupings all of these measures reduce political risk and positively affect the level of fdi this abstract was borrowed from another version of this item

global economic integration in developing countries the role of corruption and human capital investment globalization is multifaceted and involves the interaction among businesses services governments and societies beyond national borders as a result the flow of foreign direct investment fdi international trade in goods and services and the economic interdependence of the nations of the world have been increasing at the same time much attention has been paid to the effect of corruption prevalent within many cultures and societies and its impact on the economies especially developing economies this paper examines the relationship between human capital investment the level of national corruption and the global economic integration gei of a nation in developing countries based on the data collected from over 60 countries and building on the fdi and human capital theories it was found that human capital investment and corruption are related to gei it was also found that the level of corruption moderates the relationship between human capital investment and gei of developing economies the findings of the study can help to deepen our understanding of gei and have practical implications for developing countries in terms developing human capital which plays a critical role in today s knowledge based economy

the effects on agriculture in the united states of an oil import fee this paper focuses on the effect that a crude oil import fee would have on the various producing sectors consuming sectors and household categories in the united states where the interrelationships between these entities is explicitly considered special attention is given to the agricultural sectors of the economy thus in the context of a general equilibrium model the effect of a 5 00 per barrel import fee on the producing sectors in general and the three agricultural sectors plus forestry in particular on the consuming sectors on households and on the government is calculated over the period 1984 90 with such an import fee relative to the absence of a crude oil import fee the model results suggest that there will be a reduction in output by all producing sectors except the crude oil industry by about 13 924 billion there will be a fall in the consumption of goods and services by about 318 million and there will be a decline in aggregate social welfare measured as utility by about 208

the impact of a broad based energy tax on the us economy abstract this paper investigates the impact of a broad based energy tax on the us economy particularly the agricultural sectors the analytical approach used consists of a general equilibrium model composed of 12 producing sectors 13 consuming sectors six household categories classified by income and a government the effects of a 10 cents btu 10 6 tax on energy on prices and quantities are examined the results are revealing

exchange rate exchange rate volatility and foreign direct investment in the light of the importance of foreign direct investment fdi for the promotion of economic development this paper examines the impact of the changes in the real exchange rate and its volatility on fdi examining japan s fdi by industries we found that the depreciation of the currency of the host country attracted fdi while the high volatility of the exchange rate discouraged fdi our results suggest the need to avoid over valuation of the exchange rate and to maintain stable but flexible exchange rate in order to attract fdi

climate policy bucket or drainer abstract worldwide industry is responsible for about 40 of greenhouse gas ghg emissions making it an important target for climate policy energy intensive industries may be particularly vulnerable to higher energy costs caused by climate policy if companies cannot offset rising energy costs and would face increased competition from countries without climate policy they may decide to relocate their industrial production to the countries without climate policy the resulting net effect of climate policy on ghg emissions in foreign countries is typically referred to as carbon leakage carbon leakage may lead to higher global ghg emissions due to the use of less advanced technology in less developed countries based on a literature review of climate policy earlier environmental policy and analyses of historical trends this paper assesses the carbon leakage effects of climate policy for energy intensive industries reviews of past trends in production location of energy intensive industries show an increased global production share of non annex 1 countries however from empirical analyses we conclude that the trend is primarily driven by regional demand growth in contrast climate policy models show a strong carbon leakage even though future climate policy may have a more profound impact than environmental policies in the past the modelling results are doubtful leakage generally seems to be overestimated in current models especially as potential positive spillovers are often not included in the models the ambiguity of the empirical analyses and the modelling results warrants further research in the importance of production factors for relocation

the determinants of fdi location choice in china a discrete choice analysis this study addresses two questions what are the determinants of foreign direct investment fdi location choice in china what are the factors that determine investors choice between economic zo

confronting the environmental kuznets curve t he environmental kuznets curve posits an inverted u relationship between pollution and economic development kuznets s name was apparently attached to the curve by grossman and krueger 1993 who noted its resemblance to kuznets s inverted u relationship between income inequality and development in the first stage of industrialization pollution in the environmental kuznets curve world grows rapidly because people are more interested in jobs and income than clean air and water communities are too poor to pay for abatement and environmental regulation is correspondingly weak the balance shifts as income rises leading industrial sectors become cleaner people value the environment more highly and regulatory institutions become more effective along the curve pollution levels off in the middle income range and then falls toward pre industrial levels in wealthy societies the environmental kuznets curve model has elicited conflicting reactions from researchers and policymakers applied econometricians have generally accepted the basic tenets of the model and focused on measuring its parameters their regressions typically fitted to cross sectional observations across countries or regions suggest that air and water pollution increase with development until per capita income reaches a range of 5000 to 8000 when income rises beyond that level pollution starts to decline as shown in the conventional ekc line in figure 1 in developing countries some policymakers have interpreted such results as conveying a message about priorities grow first then clean up numerous critics have challenged the conventional environmental kuznets curve both as a representation of what actually happens in the development process and as a policy prescription some pessimistic critics argue that crosssectional evidence for the environmental kuznets curve is nothing more than a

distinction between intermediate and finished products in intra firm trade abstract although intra firm trade has been viewed as associated with vertical integration which exploits opportunities for exchange between inherently dissimilar economies it is more common between developed countries where horizontal integration is expected to dominate using unique data from 1974 to 1990 on swedish firms application of a tobit model explains variations in majority owned manufacturing affiliates internal imports of intermediate and finished goods on the basis of firms international organization of production effects which are unobservable in aggregate figures show up only when finished and intermediate goods are separated

exchange rate and chinese outward fdi abstractdid the exchange rate er regime change that was announced by the chinese government in 2005 lead to an increased sensitivity of chinese multinational companies mncs to er fluctuations to answer this question our article considers the effect of er level volatility and expectation on the chinese outward foreign direct investment ofdi activities in 119 countries for a period of 2003 2013 we find striking evidence that chinese renminbi appreciation has a negative impact on chinese outward fdi flows and both higher er volatility and expected depreciation encourage chinese outward fdi flows we introduce two complementary effects that explain these findings repatriation effect and mercantilist effect in view of the recent debate about the growing importance of chinese renminbi in the international transactions we believe that our research results shed light on the possible impact of er policies on chinese mncs behaviour and global fdi distribution

human capital and fdi inflow an assessment of the african case summary this study assesses the role of human capital hk on fdi inflows to sub saharan africa it uses panel data for the period 1980 2012 to asses if changing skill needs influence fdi inflows several measures of hk are used to assess whether the quality of labor explains fdi flows over the study period various versions of an fdi model were estimated and the results show that all measures of hk have a significant influence on fdi as are the traditional variables there is no evidence of the increasing importance of hk on fdi over time probably reflecting the type of fdi flowing into ssa

private information for foreign investment in emerging economies in previous studies it has been found that new foreign investment is signifi cantly related to the stock of existing investment in the country0region this paper s contribution is the finding that a japanese firm s new investment in an emerging econ omy is positively correlated with its own previous investment in that economy and also with the current0planned investments by competitors these two channels are primar ily substitutes that is investment by competitors becomes less salient when the firm has experience in the market the correlated behaviour is not explained by industrial agglom erations but appears to reflect the value of private information to investment in emerging economies information privee et investissement etranger dans les economies en emergence des travaux anterieurs ont montre que les nouveaux investissements a l etranger sont co relies de maniere significative a la taille du stock d investissement etranger dans le pays ou la region la contribution de ce memoire porte sur le fait qu un nouvel investissement d une entreprise japonaise dans une economie en emergence est co relie positivement avec son propre niveau anterieur d investissement dans cette economie mais aussi avec le niveau des investissements presents et anticipes de ses concurrents ces deux canaux d information sont des substituts le niveau d investissement par les concurrents devient moins important a proportion que l entreprise a acquis de l experience dans ce marche ce comportement co relie n est pas explique par les effets d agglomeration industrielle mais semble refleter la valeur de l information privee quand on investit dans des economies en emergence

determinants of international activity evidence from the chemical processing industry abstract this paper empirically investigates two important determinants of international activity through wholly owned operations joint ventures and technology licensing namely country risk and intellectual property rights iprs protection using a comprehensive database on investments in chemical plants during the period 1981 1996 we show that higher levels of country risk are associated with less activity into recipient economies the analysis also suggests that international activity with smaller resource commitment tends to be preferred in countries with higher levels of risk and that multinational investment is more responsive to changes in risk conditions than indigenous investment after controlling for several country characteristics we do not find iprs protection playing a significant role in fostering international activity or conditioning its mode

determinants of export orientation of foreign production by u s multinationals an inter country analysis this paper examines the role of structural and policy factors in explaining a country s attractiveness as a base for export oriented production by u s mnes empirical analysis finds wage rates and industrial capability to be important determinants of export oriented production attracted by a country exports generated by relocation are found to be dependent upon intra firm imports u s mnes are found to be using their hosts as export bases more selectively

are real exchange rates nonstationary evidence from a panel data test it is well documented that real exchange rates between the united states and many industrialized countries in the post bretton woods period are integrated this result implies that purchasing power parity ppp does not hold even as a long run relationship this paper demonstrates that the failure to reject the unit root hypothesis may result from the low power of existing univariate test procedures i test for unit roots in real exchange rates by employing a more powerful panel based procedure using both cpi and wpi real dollar exchange rate data i strongly reject the null hypothesis of a unit root my results provide overwhelming support for the long run ppp under the current float copyright 1996 by ohio state university press

foreign direct investment exchange rate variability and demand uncertainty variable real exchange rates influence the location of production facilities chosen by a multinational with risk averse investors and fixed productive factors parent companies should not be indifferent to production location even with identical expected costs of production across countries if a nonnegative correlation exists between export demand and exchange rate shocks the multinational optimally locates some productive capacity abroad the capacity share abroad increases as exchange rate volatility rises and becomes more correlated with export demand shocks these results are confirmed using quarterly u s bilateral foreign direct investment flows with canada japan and the united kingdom copyright 1995 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the effect of foreign direct investment on the urban wage in china an empirical examination how does foreign direct investment fdi affect the wage levels of cities in a host country this paper uses a panel dataset of chinese cities to examine the impact of inward fdi on the urban real wage the results suggest that the existence of fdi has a significant and positive effect on urban real wages and that this impact remains significant after controlling for other city characteristics cross city variation of fdi intensity is one important factor contributing to intercity wage inequality

an empirical investigation of the pollution haven effect with strategic environment and trade policy abstract using a new dataset on the stringency and enforcement of environmental policy this study is the first to find robust confirmation of a pollution haven effect in a cross country context by accounting for strategically determined environment trade and intellectual property right ipr policies a simple game theoretic approach to policy determination is described which suggests an identification strategy based on other country characteristics it is found that for the top 20th percentile of countries in terms of growth in u s multinational affiliate value added as much as 8 6 of that growth between 1999 and 2003 can be attributed to declining relative stringency and enforcement of environmental policy the results are robust to a number of identification tests weak iv tests and third country spatial effects further evidence is found that relatively footloose industries are more likely to be affected by environmental policy than more traditionally dirty industries and enforcement of environmental policies tends to be a more important deterrent than the stringency of the policy set

entry by foreign firms in the united states under exchange rate uncertainty this paper tests the effects that real exchange rate fluctuations had on foreign direct investment into the united states during the 1980s using a sample of foreign investments in sixty one four digit sic u s wholesale industries this paper finds exchange rate volatility to be negatively correlated with the number of foreign investments that occur in these industries this negative effect is most pronounced for industries where sunk investments in physical and intangible assets are relatively high although exchange rate volatility deters investment from all countries its effect was most significant for investments by japanese companies copyright 1993 by mit press

toward a new conception of the environment competitiveness relationship accepting a fixed trade off between environmental regulation and competitiveness unnecessarily raises costs and slows down environmental progress studies finding high environmental compliance costs have traditionally focused on static cost impacts ignoring any offsetting productivity benefits from innovation they typically overestimated compliance costs neglected innovation offsets and disregarded the affected industry s initial competitiveness rather than simply adding to cost properly crafted environmental standards can trigger innovation offsets allowing companies to improve their resource productivity shifting the debate from pollution control to pollution prevention was a step forward it is now necessary to make the next step and focus on resource productivity

reappraising the eclectic paradigm in an age of alliance capitalism this article discusses the implications of the advent of alliance capitalism for our theorizing about the determinants of mne activity in particular it argues that due to the increasing porosity of the boundaries of firms countries and markets the eclectic or oli paradigm of international production needs to consider more explicitly the competitive advantages arising from the way firms organize their inter firm transactions the growing interdependencies of many intermediate product markets and the widening of the portfolio of the assets of districts regions and countries to embrace the external economies of interdependent activities

the effects of uncertainty and adjustment costs on investment in the almond industry a neoclassical model of investment behavior is developed wherein firms are assumed to maximize the expected present value of net revenue under leontief technology prices and yields are assumed to be stochastic this framework yields investment as a function of the expected present value of the output from one unit of capital and the variance of the expected value this theory is applied to investment in the almond industry the model outperforms both a model without uncertainty and one with neither uncertainty nor adjustment costs using in sample and out of sample tests copyright 1989 by mit press

information costs agglomeration economies and the location of foreign direct investment in china1 he c 2002 information costs agglomeration economies and the location of foreign direct investment in china reg studies 36 1029 1036 foreign investors suffer from adverse information asymmetry and face internal and external uncertainties in host economies better access to information and a variety of agglomeration economies could attenuate the disadvantages that foreign investors encounter statistical results strongly buttress the argument that foreign investors are inclined to favour such locations that could minimize information costs and offer a variety of agglomeration economies theoretical and policy implications and further research directions are discussed at the end 1 this paper was presented at the 63rd annual meeting of the association of pacific coast geographers sept 13 16 2000 arcata ca

on the growth of foreign affiliates multinational plant networks joint ventures and flexibility we take a flexibility perspective to analyse employment growth in a large sample of japanese manufacturing affiliates in nine asian countries during the years leading up to and into the asian financial crisis 1995 1999 we find that joint ventures are less flexible than wholly owned affiliates in responding to changing environmental conditions in the focal country and underperform in high growth environments multinational enterprises mnes use the flexibility created by their multinational plant network to adjust affiliate employment in response to labour cost changes in other countries in which they operate plants however no evidence was found that the presence of joint ventures in multinational plant networks reduces this network flexibility our findings suggest that more research is needed on the heterogeneous responses of mnes and their affiliates to changing economic environments

the location of overseas production and production for export by u s multinational firms abstract the location of overseas manufacturing production is influenced by common factors that operate in all industries notably proximity to the united states and to other markets within industries opposites attract low wage and low capital intensity parents choose high wage countries production for export is attracted by large internal markets in host countries economies of scale in production presumably make large markets economical as export bases another factor is high trade propensities of host countries u s firms tend to export from high wage countries but labor cost is not in general a major influence on the location of export production

multinational firms technology and location this thesis consists of four essays its main theme is the location of production in multinational firms subsidizing away exports a note on strategic trade policy investigates how strategic

language fluency and earnings estimation with misclassified language indicators we use panel data to analyze the determinants of speaking fluency and wages of immigrants our model takes account of two problems that may bias ols estimates of the impact of speaking fluency on earnings first subjective variables on an ordinal discrete scale such as self reported language ability can suffer from misclassification errors the model decomposes misclassification errors into a time persistent and a time varying component second the model accounts for correlated unobserved heterogeneity in language and earnings equation the main finding is that these two generalizations of the standard model both lead to substantial changes in the estimated effect of speaking fluency on earnings

what is the role of openness for china s aggregate industrial so2 emission a structural analysis based on the divisia decomposition method abstract having observed the weaknesses in previous structural analyses on the role of environmental kuznets curve ekc the author proposes a detailed analysis using a rich data set of provincial level production and so2 emission intensity of 13 industrial sectors the latter represent more than 98 of the total industrial production in each chinese province for the period 1991 2001 through the use of the log mean divisia index decomposition method the variations in province level industrial so2 emissions with regard to the 1990 baseline level are decomposed into the contribution from three components scale composition and technical effects the following analysis seeks to explain how trade openness affects aggregate industrial so2 emission through its impact on the structural determinants for these three components of region specific environmental variations

competing destinations gravity model an application to the geographic distribution of fdi the competing destinations formulation of the gravity model ensues from the fact that unlike the classical version this approach explicitly acknowledges the interdependence of the flows between a set of alternative locations i e country recipients are competing for foreign direct investment fdi this article examines empirically a range of theoretical hypotheses about the determinants of fdi location in a panel data regression framework the results of the estimation of a gravity model lend support to the proximity concentration and internalization hypotheses also the fact that fdi has been found to be decreasing in the competition posed by alternative locations is suggestive of the superiority of the competing destinations version of the gravity equation over its classical formulation

investment climate and fdi in developing countries firm level evidence this paper uses firm level data across 77 developing countries to show that constraints related to investment climate hamper foreign direct investment fdi the main results show that physical infrastructure problems financing constraints and institutional problems discourage fdi these results are robust to an alternative definition of fdi introduction of additional explanatory variables and some breakdown analyses different sectors of activity and comparison between sub saharan africa and other developing countries the results also highlight that exporter foreign firms are more constrained in their activity by physical infrastructure hurdles and the lack of skilled workers compared to firms supplying the domestic market

capital controls and foreign direct investment abstract this paper examines the effect of three types of capital control policies on fdi a the existence of multiple exchange rates b restrictions on capital account and c restrictions on the repatriation of export proceeds we find that the impact of capital controls on fdi varies by region and has changed over time in the 1970s and 1980s none of the policies had a significant impact on fdi in the 1990s all three were significant furthermore capital controls have no effect on fdi to sub saharan africa and the middle east but affects fdi to east asia and latin america adversely

investing to cooperate theory and experiment we study theoretically and in a lab experiment investment decisions in environments where property rights are absent in our setting a player chooses an investment level before interacting repeatedly with a given set of agents the investment stochastically affects the payoffs of the game in every subsequent period we show that more volatile returns make investment more difficult in the absence of legal protection and might force the investor to invest more to guarantee cooperation experimental results are broadly consistent with the theoretical findings

aggregate impacts of the proposed reduction in the motor fuels excise tax in the united states this paper assesses the effects of the proposed reduction in the excise tax on gasoline and diesel fuel on the us economy the analytical approach used in the analysis consists of a computable general equilibrium model composed of 14 producing sectors 14 consuming sectors six household categories classified by income and a government the effects of a 4 3 cents gallon reduction in the excise tax on gasoline and diesel fuel on prices and quantities are examined the results suggest for example a decrease in the tax would result in higher output by the producing sectors by approximately 2 86 billion an expansion in the consumption of goods and services by approximately 3 48 billion and an increase in welfare by approximately 3 59 billion the government would realize a decrease in revenue of approximately 2 37 billion when subjected to a sensitivity analysis the results are reasonably robust with regard to the assumption of the values of the substitution elasticities

a switching frontier model for imperfect sample separation information with an application to constrained labor supply this paper combines frontier functions and switching regressions this allows economic agents to operate under different efficiency regimes thus relaxing the assumption that all observations are drawn from the same distribution of inefficiency the switch is based on sample separation information that is treated first as perfect then as imperfect or noisy available sample separation information suggests an observation s regime however the information may not be accurate by comparing results across alternative specifications of sample separation information as perfect and noisy this approach provides evidence on the quality of the sample separation information the technique s usefulness is demonstrated via an application to constrained labor supply copyright 1995 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

host country reforms and fdi inflows how much difference do they make summary this study examines the effects of various policies on foreign direct investment fdi flows from the perspective of the eclectic theory of international investment and hence the advantages of foreign ownership host country location and internationalization host country policies can influence fdi flows primarily through their influence on the advantages of location in the host country pooled cross section and time series data for 49 less developed countries ldcs over 1970 95 are used to examine the effects of several different types of policy institutional variables including corporate tax rates tariff rates the degree of openness to international capital flows exchange rate distortions contract enforcement nationalization risk bureaucratic delay and corruption a multivariate analysis of the effects on fdi flows of each type of policy with and without controls for other relevant determinants is conducted two different sources of fdi data are employed as well as two different measures of capital controls although there are methodological problems in estimation and especially collinearity problems and relatively severe availability constraints for some of the relevant measures the results demonstrate the relevance and importance for fdi flows of many of the policy institutional variables under study they also indicate that the results from panel methods yield results that differ rather significantly from those obtained from pure cross section analysis because of complementarity between the various elements of a healthy investment climate the effects of some policy reforms estimated from models which do not control for changes in other policies may overstate the effectiveness of individual policy reforms

time varying international stock market interaction and the identification of volatility signals abstract this paper investigates the dependency of international stock market interaction on financial volatility we show in a stylized economic model that volatility dependent cross market spillovers can be interpreted in two different ways as indicating information flow or uncertainty if higher volatility in one market leads to higher lower reactions in another market volatility reflects information uncertainty we apply a simultaneous time varying coefficient model where structural arch type variances serve two purposes governing the time variation of spillovers and ensuring statistical identification we analyze data of us and further stock markets indeed we find strong nonlinear volatility dependent spillovers

haircuts or hysteresis sources of movements in real exchange rates abstract we empirically assess the importance of two sources of real exchange rate movements in models where ppp holds only among traded goods real exchange rate variation results from relative price movements within countries an alternative explanation relies on hysteretic price setting and nominal exchange rate changes using disaggregated price data from 11 oecd nations we find some support for the non traded goods models for example prices of haircuts in canada and the united states are unrelated in the long run we find stronger evidence to support models that emphasize sticky prices transportation costs or other impediments to frictionless trade

network linkages and location choice in foreign direct investment this paper shows that network linkage is an important determinant of location choice in foreign direct investment fdi network linkages are divided into internal intra firm and external inter firm linkages external linkages are further separated into strategic and relational linkages we found that taiwanese firms are keen on making external linkages but are indifferent to or incapable of making internal linkages through fdi strategic linkages motivate taiwanese fdi in the united states while relational linkages facilitate taiwanese fdi in southeast asia and china small firms are more sensitive to relational linkages than large firms in their choice of fdi location

an evaluation of the investment environment in international logistics zones a taiwanese manufacturer s perspective abstract with the rapid development of international logistics the role of international logistics zones has become increasingly important this study evaluated the importance of investment environment factors namely political infrastructure cost and market factors for firms intention to invest in international logistics zones a structural equation modeling sem approach was employed to analyze respondents foreign direct investment fdi intention results indicated that market cost and infrastructure factors have a positive effect on firms intention to invest in international logistics zones the influence of political factor on firms investment intention was not supported in this study theoretical and practical implications of the findings for firms foreign direct investment in international logistics zones are discussed

the location decisions of foreign investors in china untangling the effect of wages using a control function approach there is almost no support for the proposition that capital is attracted to low wages from firm level studies we examine the location choices of 2 884 firms investing in china between 1993 and 1996 to offer two main contributions first we find that the location of labor intensive activities is highly elastic to provincial wage differences generally investors wage sensitivity declines as the skill intensity of the industry increases second we find that unobserved location specific attributes exert a downward bias on estimated wage sensitivity using a control function approach we estimate a downward bias of 50 to 90 in wage coefficients estimated with standard techniques i introduction

macro determinants of fdi inflows to japan an analysis of source country characteristics this paper examines the source country determinants of fdi into japan the paper highlights certain methodological and theoretical weaknesses in the previous literature and offers some explanations for hitherto ambiguous results specifically the paper highlights the importance of panel data analysis and the identification of fixed effects in the analysis rather than simply pooling the data indeed we argue that many of the results reported elsewhere are a feature of this mis specification to this end pooled fixed effects and random effects estimates are compared the results suggest that fdi into japan is inversely related to trade flows such that trade and fdi are substitutes moreover the results also suggest that fdi increases with home country political and economic stability the paper also shows that previously reported results regarding the importance of exchange rates relative borrowing costs and labour costs in explaining fdi flows are sensitive to the econometric specification and estimation approach the paper also discusses the importance of these results within a policy context in recent years japan has sought to attract fdi though many firms still complain of barriers to inward investment penetration in japan the results show that cultural and geographic distance are only of marginal importance in explaining fdi and that the results are consistent with the market seeking explanation of fdi as such the attitude to risk in the source country is strongly related to the size of fdi flows to japan 2007 the authors journal compilation 2007 blackwell publishing ltd

the real exchange rate and foreign direct investment in the united states relative wealth vs relative wage effects abstract there has been a significant correlation between u s inward foreign direct investment and the united states real exchange rate since the 1970s in this paper we examine the determinants of four measures of inward foreign direct investment to the united states from seven industrial countries over the period 1979 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

exploring the regional distribution of inbound foreign direct investment in the uk in theory and practice evidence from a five region study fallon g and cook m exploring the regional distribution of inbound foreign direct investment in the uk in theory and practice evidence from a five region study regional studies this paper examines the main factors that attract inbound foreign direct investment fdi at the uk regional level using econometric data from five sample uk regions the south east the west midlands the north west wales and scotland broadly representing the country s regional economic divide the findings indicate that regional and national but not european union level factors linked to several underlying strategic determinants help determine the regional distribution of inbound foreign direct investment and its inter regional variation the paper concludes that governmental policy makers at the national and regional levels can have an important role to play in drawing targeted foreign direct investment inflows to the uk regions fallon g et cook m examiner la distribution regionale de l ide au royaume uni en the

do sovereign rating announcements affect emerging market exchange rate correlations a multivariate dcc garch approach abstractthis article investigates the effects of sovereign credit rating announcements on time varying exchange rate return correlations for a sample of 11 emerging market countries over the period 2002 2015 the data set covers daily exchange rates and long term foreign currency sovereign ratings outlooks and watch list the pairwise time varying correlations are derived by corrected dynamic conditional correlation cdcc modelling which is a member of multivariate generalized autoregressive conditional heteroskedasticity garch models family furthermore to capture the global factor effect a dynamic weighted index is created by using dynamic principal component dpc analysis findings suggest that some of the emerging market exchange rate co movements are affected by rating announcements upgrades of moody s and downgrades of fitch lead to spillovers main source of these spillovers are sovereign credit rating changes of european countries especially czech republic and turkey countries with high

risky business political instability and greenfield foreign direct investment in the arab world which foreign direct investments are most affected by political instability analysis of quarterly greenfield investment flows into countries in the middle east and north africa during the period from 2003 to 2012 shows that adverse political shocks are associated with significantly reduced investment inflows in the non resource tradable sectors by contrast investments in natural resource sectors and non tradable activities appear insensitive to such shocks political instability is thus associated with increased reliance on non tradables and aggravated resource dependence

locational advantage and us foreign direct investment in uk manufacturing the relationship between foreign direct investment fdi and international trade is examined with specific reference to us fdi in the uk four complementary hypotheses are tested on a cross section of uk industries there is evidence of us fdi being located in uk industries which have a revealed comparative advantage and that large market size effects are important on the other hand little evidence was found for the protection jumping and industrial concentration hypotheses

foreign direct investment the role of institutional and cultural determinants abstractusing panel data for 29 source and 65 host countries in the period 1995 2009 we examine the determinants of bilateral fdi stocks focusing on institutional and cultural factors the results reveal that institutional and cultural distance is important and that fdi has a predominantly regional aspect fdi to developing countries is positively affected by better institutions in the host country while foreign investors prefer to invest in developed countries that are more corrupt and politically unstable compared to home the results indicate that foreign investors prefer to invest in countries with less diverse societies than their own

the potential benefits and costs of an increase in us gasoline tax abstract this paper examines the impact that an increase in the tax on gasoline would have on the us economy that is in the context of a general equilibrium model the effect that a 15 gallon increase in the tax on gasoline would have on producing sectors consuming sectors households and the government is estimated the results suggest that there will be a reduction in output by all producing sectors by about 9 4 billion there will be a fall in the consumption of goods and services by about 9 6 billion and there will be a decline in aggregate social welfare measured as utility by about 15 0 billion the government will realize an increase in revenue of about 8 0 billion

real exchange rate risk expectations and the level of direct investment four models of direct investment are analyzed assuming various relationships between foreign and domestic production the direct effect of risk adjusted expected real foreign currency appreciation is to lower foreign capital cost thus stimulating direct investment however when costs of other inputs are also affected induced productivity changes or output price changes may offset the direct effect reducing direct investment pooled estimation results for u s annual bilateral direct investment flows to five industrialized countries show significant reductions associated with expected appreciation of real foreign currency and significant increases associated with risk these results are consistent with the model where in response to risk the multinational firm reduces exports to the foreign country but offsets this somewhat by increasing foreign capital input and production

how do international joint ventures create shareholder value this study attempts to identify conditions under which announcements of international joint venture jv formation lead to increases in shareholder value of participating u s firms it does so by combining the singular theoretical foci of previous work on the topic and specifying previously unconsidered but conceptually important influences on firms expected jv performance the study s findings indicate support for the hypothesized effect of variables in partners task related competitive and structural context s but not those in these firms partner related and institutional context s specifically partner venture business relatedness the pursuit of r d oriented activity greater equity ownership and large firm size all are found to have a positive impact on firms jv based value creation although this study finds support for the performance impact of firm level competition the direction of this impact is contrary to that hypothesized no support is found for hypothesized effect of partner partner business relatedness previous jv experience partners relative firm size national cultural relatedness and jv host country political risk copyright 2000 john wiley sons ltd

dodging bullets the heterogeneous effect of political violence on greenfield fdi the relationship between political violence and greenfield foreign direct investment is contingent on the type of violence characteristics of the investment receiving sector and extent to which the investing firm is geographically diversified this paper presents an analysis with a dynamic fixed effects model for a panel of 90 developing countries from 2003 to 2012 the analysis shows that nationwide political conflict is negatively associated with total and non resource related greenfield foreign direct investment but not with resource related greenfield foreign direct investment the insensitivity to political conflict of multinational firms in the resource sector is associated with the high profitability of natural resource extraction and the companies geographic constraints on location choice during the period of estimation in the non resource sector the less geographically diversified firms are most sensitive to the risk of conflict

exchange rate volatility before and after the float this paper provides a descriptive analysis of broad features of major exchange rates since the early 1970s and compares these features with those of the 1960s the analysis is then extended to investigate whether these features are manifested in interest rates and in commodity prices the results indicate that while the exchange rates have become more volatile during the current floating rate regime the moments are comparable with those for interest rates and commodity prices

how corruption influences foreign direct investment a panel data study abstract this article analyzes the sign and development of the effect of corruption on foreign direct investment fdi economic theory distinguishes grabbing hand corruption from helping hand corruption the former suggests a negative impact of corruption on fdi the latter one a positive effect empirically we apply a data set of 21 home and 59 developed and less developed host countries covering between 1983 and 1999 to investigate the corruption impact we employ a panel data model that particularly refers to the knowledge capital model of multinational activity we find a negative relationship between corruption and fdi this in turn suggests that the helping hand effects of corruption are outweighed by the grabbing hand effects further we observe that corruption is an important impediment of fdi in developed economies but not in less developed ones finally we demonstrate that the importance of corruption has decreased over the years

biofuel developments in mozambique update and analysis of policy potential and reality abstract climate change rising oil prices and concerns about future energy supplies have contributed to a growing interest in using biomass for energy purposes several studies have highlighted the biophysical potential of biofuel production on the african continent and analysts see mozambique as one of the most promising african countries favorable growing conditions and the availability of land water and labor are mentioned as major drivers behind this potential moreover the potential of biofuel production to generate socio economic benefits is reflected in the government s policy objectives for the development of the sector such as reducing fuel import dependency and creating rural employment this article provides an overview of biofuel developments in mozambique and explores to what extent reality matches the suggested potential in the country we conclude that biofuel developments mainly take place in areas near good infrastructure processing and storage facilities where there is skilled labor available and access to services and goods moreover our analysis shows the need to timely harmonize current trends in biofuel developments with the government s policy objectives as the majority of existing and planned projects are not focusing on remote rural areas and in absence of domestic markets principally target external markets

the effect of population health on foreign direct investment inflows to low and middle income countries this paper investigates the effect of population health on gross inflows of foreign direct investment fdi we conduct a panel data analysis of 74 industrialized and developing countries over 1980 2000 our main finding is that gross inflows of fdi are strongly and positively influenced by population health in low and middle income countries our estimates suggest that raising life expectancy by one year increases gross fdi inflows by 9 after controlling for other relevant variables these findings are consistent with the view that health is an integral component of human capital for developing countries

accounting for u s real exchange rate changes this study measures the proportion of u s real exchange rate movements that can be accounted for by movements in the relative prices of nontraded goods the decomposition is done at all possible h

the volatility of offshore investment abstract offshore investment often bears the image of footloose industry with little to hinder movement to the most favorable environment an effort to describe this particular segment of u s direct investment supports some elements of the colorful anecdotal portrait painted by critics in the third world semiconductor assemblers are moderately sensitive to wage rates and adjust quite rapidly in maintaining what they perceive as a diversified portfolio of risky ldc production locations on the other hand this reaction is small enough to guarantee that modest increases in wages will not send all investment fleeing from an export platform new methods of modelling direct foreign investment when risk diversification is important in explaining industrial location decisions are introduced in this paper

are asean countries havens for japanese pollution intensive industry in an era of closer worldwide economic integration the role that environmental regulations play in shaping a country s comparative advantage is greater than ever this has led to fears that dirty firms will relocate from developed to developing countries where environmental regulations may be less stringent the so called pollution haven hypothesis to date however there is little support for the existence of pollution havens despite anecdotal evidence and the theoretical predictions in this paper we employ a unique industry level dataset for japan and examine whether japanese industries have relocated production to their asean neighbours in response to the relative stringency of japanese environmental regulations not only do we find no evidence for pollution haven consistent behaviour but also some indication that the complex relationship between the characteristics of japanese dirty industries and environmental regulations may actually have reduced japanese outward fdi to the philippines

agglomeration effects in foreign direct investment and the pollution haven hypothesis does environmental regulation impair international competitiveness of pollution intensive industries to the extent that they relocate to countries with less stringent regulation turning those countries into pollution havens we test this hypothesis using panel data on outward foreign direct investment fdi flows of various industries in the german manufacturing sector and account for several econometric issues that have been ignored in previous studies most importantly we demonstrate that externalities associated with fdi agglomeration can bias estimates away from finding a pollution haven effect if omitted from the analysis we include the stock of inward fdi as a proxy for agglomeration and employ a gmm estimator to control for endogenous time varying determinants of fdi flows furthermore we propose a difference estimator based on the least polluting industry to break the possible correlation between environmental regulatory stringency and unobservable attributes of fdi recipients in the cross section when accounting for these issues we find robust evidence of a pollution haven effect for the chemical industry

evaluating the impact of specific environmental regulations on exports there is clear concern in developing and transition economies that new and proposed changes in environmental policies and regulations will reduce exports the existing trade and environment literature however provides little empirical guidance for policy makers to evaluate sector specific trade impacts of environmental regulatory changes to assist with such analysis this paper develops a microeconomic framework that can be used to evaluate the impact of changed environmental regulations on exports the results provide clear empirical guidance to understand when the impact of such changes are likely to be relatively small and when the impacts are larger

governance infrastructure and us foreign direct investment this paper examines the statistical importance of governance infrastructure as a determinant of us foreign direct investment fdi in broad terms governance infrastructure represents attributes of legislation regulation and legal systems that condition freedom of transacting security of property rights and transparency of government and legal processes our econometric analysis uses a two stage estimation procedure in the first stage the probability that a country is an fdi recipient is estimated the results indicate that countries that fail to achieve a minimum threshold of effective governance are unlikely to receive any us fdi countries that receive no us fdi are typically countries that do not promote free and transparent markets that have ineffective governments and that often have legal systems that are not rooted in english common law in the second stage the analysis is restricted to those countries that did receive fdi flows the estimated equations focus on the determinants of the amount of fdi received given that a country is a recipient of us fdi governance infrastructure including the nature of the legal system is an important determinant of the amount received

do civil and political repression really boost foreign direct investments multinational enterprises are often accused of having a preference for investing in countries in which the working populations civil and political rights are largely disregarded this article presents an empirical investigation of the popular political repression boosts fdi hypothesis and arrives at the conclusion that the hypothesis is not supported on the contrary multinational enterprises rather appear to be attracted by countries in which civil and political freedom is respected

international investment location decisions abstract in international location tournaments governments compete for foreign investment with tax and other short run incentives such tournaments can be won if agglomeration economies are sufficiently powerful to overcome investors desire to spread investments as a hedge against risk we focus on manufacturing investments by u s multinationals in the 1980s our econometric results suggest that agglomeration economies are indeed the dominant influence on investor calculations paradoxically short run incentives have limited apparent impact on location choice we conclude that high cost tournament play is unnecessary for countries with good infrastructure development specialized input suppliers and an expanding domestic market

foreign direct investment and local linkages this paper analyses the pattern of local linkages in foreign direct investment fdi treating such local linkages as an investment in local relationships using taiwanese manufacturing firms investing abroad as the sample for our case study we find that the local linkage intensity of a foreign subsidiary differs by fdi location entry mode firm size and the nature of the production network in which an investor is embedded more local linkages will be pursued by an investor if it is in search of distinctive and inimitable resources as opposed to homogeneous and reproducible resources investment in local linkages always begins with the linkage that carries the lowest risk to the original business network for manufacturing firms the sequence of such linkages is workers components and parts subcontracting and finally sources of r d

testing the predictive value of subjective labour supply data empirical implementation of labour supply theories is usually based on realized labour market behaviour this requires strong assumptions about the impact of labour demand a possibility to avoid these assumptions is to make use of subjective data on desired labour supply in this paper we investigate whether respondents answers to survey questions on the desired number of working hours contain additional information on the preferences of the individuals using panel data for the netherlands we analyze whether deviations between desired hours and actual hours of work help to predict future job changes or changes in hours worked we use parametric and recently developed nonparametric tests the results suggest that subjective information on desired working hours are helpful in explaining female labour supply for males the evidence is mixed

multinational enterprises and wage costs vertical fdi revisited abstract this study explores how wage costs for high skilled and less skilled labor in host countries affect the level of affiliate activities conducted by foreign mnes we find support for vertical fdi in the sense that more fdi is conducted in countries where less skilled labor is relatively cheap in addition we find that skilled wage cost premia also affect fdi activities previously associated with horizontal fdi i e local affiliate sales consequently the potential effects of relative wage costs on mne activities are large rough calculations suggest that more than 20 percent of us affiliate sales in 1998 can be attributed to skilled wage cost premia

political variables in cross country growth analysis the recent boom in cross country growth analysis has renewed the empirical interest in political sources of economic growth a large number of studies have tested political variables in growth regressions and a very heterogenous set of variables has been proposed to measure economically relevant differences in the political systems of countries this paper distinguishes five categories of relevant political variables democracy government stability political violence policy volatility and subjective perception of politics for each of these categories the specification testing method and results of the most relevant studies are presented and are critically discussed the paper concludes that measures of democracy are least successful and measures of policy volatility and subjective perception of politics most successful as explanatory variables in cross country growth regressions

the impact of ofdi on the performance of chinese firms along the belt and road using feasible generalized least squares fgls and ordinary least square ols estimations on a dataset of 1208 outward foreign direct investment ofdi events by chinese listed firms from 2004 to