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

japanese and u s firms as foreign investors do they march to the same tune during the 1980s u s and japanese multinationals were attracted by some similar country characteristics low wage inflation low country risk good infrastructure and an educated work force both groups of investors displayed a persistence being strongly attracted to locations with significant past investment japanese firms started the decade as somewhat more fluid but as their investment levels surged they became much more persistent overall u s firms were more influenced by domestic market conditions and moved contrary to changes in host country trade intensity japanese investment had a somewhat greater affinity for trade reflecting their long standing interest in east asia some limited evidence suggests that factors driving the two groups of investors converged in the second half of the 1980s

returns to regionalism an analysis of nontraditional gains from regional trade agreements the past decade has witnessed a renewed interest in regional trade agreements with many policymakers and academics seeming to believe that these provide more than the traditional gains from trade this article examines several possible benefits that regional trade agreements may confer on their partners including credibility signaling bargaining power insurance and coordination it assesses the necessary conditions for each possible channel to work gives stylized examples of specific types of policy where the benefit might be applicable examines cases where the explanation might be relevant and discusses their overall plausibility it concludes by examining the north american free trade agreement and the europe agreements

cluster or capture manufacturing foreign direct investment external economies and agglomeration phelps n a cluster or capture manufacturing foreign direct investment external economies and agglomeration regional studies this paper reviews the nature and significance of external economies associated with multinational enterprise mne participation in the manufacturing industries of host economies it argues that the balance of forces of internalization and externalization is currently skewed towards the former and the interests of mnes rather than the latter and the interests of local and national communities and governments a stylized comparison of developmental and competition state interventions in relation to mnes and their foreign direct investment fdi suggests that in the absence of co ordinated interventions by governments there will commonly be a failure of the logic of internalization to permit localized processes of externalization indeed the experiences of the competition states of the uk and the usa highlight the potential for the partial internalization or capture of loc

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

cyclical dynamics in idiosyncratic labor market risk is individual labor income more risky in recessions this is a difficult question to answer because existing panel data sets are so short to address this problem we develop a generalized method of moments estimator that conditions on the macroeconomic history that each member of the panel has experienced variation in the cross sectional variance between households with differing macroeconomic histories allows us to incorporate business cycle information dating back to 1930 even though our data do not begin until 1968 we implement this estimator using household level labor earnings data from the panel study of income dynamics we estimate that idiosyncratic risk is i highly persistent with an annual autocorrelation coefficient of 0 95 and ii strongly countercyclical with a conditional standard deviation that increases by 75 percent from 0 12 to 0 21 as the macroeconomy moves from peak to trough

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

dynamic financial constraints distinguishing mechanism design from exogenously incomplete regimes we formulate and solve a range of dynamic models of constrained credit insurance that allow for moral hazard and limited commitment we compare them to full insurance and exogenously incomplete financial regimes autarky saving only borrowing and lending in a single asset we develop computational methods based on mechanism design linear programming and maximum likelihood to estimate compare and statistically test these alternative dynamic models with financial information constraints our methods can use both cross sectional and panel data and allow for measurement error and unobserved heterogeneity we estimate the models using data on thai households running small businesses from two separate samples we find that in the rural sample the exogenously incomplete saving only and borrowing regimes provide the best fit using data on consumption business assets investment and income family and other networks help consumption smoothing there as in a moral hazard constrained regime in contrast in urban areas we find mechanism design financial information regimes that are decidedly less constrained with the moral hazard model fitting best combined business and consumption data we perform numerous robustness checks in both the thai data and in monte carlo simulations and compare our maximum likelihood criterion with results from other metrics and data not used in the estimation a prototypical counterfactual policy evaluation exercise using the estimation results is also featured

modeling greenhouse gas reduction from the australian electricity sector the australian electricity sector is expected to undergo major changes to reduce the current sectoral co2 emission of 190 million tons to 96 million tons by 2050 this paper summarizes two major modeling studies that have been undertaken since 2006 to understand the full set of investment price and financial impact on existing generators especially coal based generators we have used a long term capacity and dispatch optimization model to comprehensively analyze both least cost and market led expansion of the system to accommodate alternative emission reduction targets from a shallow cut to a deep cut the modeling results demonstrate the cost of meeting the target can be over 30 billion in npv terms a mix of clean coal technologies gas and nuclear technologies is expected to displace the existing stock of conventional coal which varies significantly depending on the emission reduction target the analysis also show that mandatory renewable targets or technology standards are inefficient policies in comparison to a market based policy such as the proposed emissions trading scheme

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

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

self insurance vs self financing a welfare analysis of the persistence of shocks abstract we study the welfare cost of market incompleteness in a generalized bewley model where idiosyncratic risk takes the form of entrepreneurial productivity shocks market incompleteness in our framework has two dimensions first in the bewley tradition only a limited set of instruments for consumption smoothing is available second entrepreneurs capital rental is subject to collateral constraints as is well known it is harder to self insure against more persistent shocks and the welfare cost of missing consumption insurance increases with shock persistence on the other hand with collateral constraints an increase in shock persistence leads to better allocation of production factors through entrepreneurs self financing and the welfare cost of imperfect capital rental markets decreases with shock persistence the overall welfare cost of market incompleteness can be increasing decreasing or even non monotone in shock persistence depending on the relative strengths of its two components the cost of missing insurance and the cost of imperfect capital markets

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

effects of inward investment on outward investment the venture capital industry worldwide 1985 2007 we identify inward investment as an important impetus to outward investment supplemental to the impetuses depicted in conventional internationalization frameworks by incorporating both the spillover and competition effects of foreign entrants we develop an integrated framework of the inward outward investment relationship for different investment modes and different home country and host country pairs our analysis of venture capital vc investments worldwide from 1985 to 2007 shows a positive spillover effect on outward investment for inward co investments and a negative competition effect on outward investment for inward standalone investments we find the strongest effects when the host country is a laggard in the vc industry and the home country is a leader

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

a game theoretic analysis of wind generation variability on electricity markets wind generation variability in an energy only market such australian national electricity market nem can create significant revenue uncertainties for incumbent generators and substantially increase price risks faced by retailers this paper presents a cournot game model to formally analyze how high volatility of wind generation in a concentrated energy only market can raise the peak shoulder period of typically low wind generation prices to offset the foregone revenue during off peak periods of high wind generation a monte carlo simulation around a cournot game is formulated as an inter temporal nonlinear optimization problem to assess these issues the model is implemented for the south australian zone of the australian nem that has experienced high growth in wind generation in recent years the model results support some of the observed spot pricing behavior in the region in recent years these findings have significant ramifications for the efficacy of the energy only market in scenarios with high penetration of intermittent generation

accounting for the u s earnings and wealth inequality we show that a theory of earnings and wealth inequality based on the optimal choices of ex ante identical households that face uninsured idiosyncratic shocks to their endowments of efficiency labor units accounts for the u s earnings and wealth inequality almost exactly

efficiency and distributional implications of global restrictions on labour mobility calculations and policy implications abstract in this paper a procedure for calculating the annual efficiency gains from various alternative changes in existing global immigration restrictions is presented along with an evaluation of impacts of wage rate changes on non migrating labour a simple methodology uses data on u s dollar gnp capita across countries to infer differences in the marginal productivity of labour both between countries and across major world trading areas two key assumptions used are that the worldwide labour supply is fixed and full employment occurs in all regions differences occuring in labour s marginal product across regions are assumed to arise because of barriers to inward mobility of labour in high wage countries when these are removed labour reallocates and efficiency gains occur while the calculations are based on contentious assumptions a striking feature is the size of the annual worldwide gains in some cases annual gains can easily exceed existing worldwide gnp generated in the presence of labour mobility restrictions while all gains do not accrue to ldc s the size of the gains nonetheless suggests that this issue may be much more important to these countries than other issues raised thus far in the north south debate the losses to labour already employed in high wage countries dramatize the incentives for labour unions in the developed world to oppose liberalization

fdi waves waves of neglect of political risk studies of the impact of local political risk on foreign direct investment inflows overlook that worldwide fdi comes in waves using a simple model we show that the impact of political risk on fdi inflows is likely to be weaker the larger the worldwide amount of fdi which may question standard estimates and their policy implications using a large sample of developing and developed economies we estimate the sensitivity of the distribution of fdi inflows across countries to the local political risk we find that it is a decreasing function of the worldwide amount of fdi this finding has been upheld after many robustness checks

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

immigrant links to the home country empirical implications for u s bilateral trade flows immigrants ties to their home countries can play a key role in fostering bilateral trade linkages immigrant ties include knowledge of home country markets language preferences and business contacts that have the potential to decrease trading transaction costs empirical results for the united states suggest that immigrant links have historically been important in increasing bilateral trade flows with immigrants home countries copyright 1994 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

impact of optimal storage allocation on price volatility in energy only electricity markets recent studies show that the fast growing expansion of wind power generation may lead to extremely high levels of price volatility in wholesale electricity markets storage technologies regardless of their specific forms e g pump storage hydro large scale or distributed batteries are capable of alleviating the extreme price volatility levels due to their energy usage time shifting fast ramping and price arbitrage capabilities in this paper we propose a stochastic bilevel optimization model to find the optimal nodal storage capacities required to achieve a certain price volatility level in a highly volatile energy only electricity market the decision on storage capacities is made in the upper level problem and the operation of strategic regulated generation storage and transmission players is modeled in the lower level problem using an extended stochastic bayesian cournot based game the south australia sa electricity market which has recently experienced high levels of price volatility and a 30 bus ieee system are considered as the case studies our numerical results indicate that 50 price volatility reduction in the sa electricity market can be achieved by installing either 430 mwh regulated storage or 530 mwh strategic storage in other words regulated storage firms are more efficient in reducing the price volatility than strategic storage firms

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

fdi growth and the asian financial crisis the experience of selected asian countries this paper studies the trends in foreign direct investment fdi flows into selected south east asian and east asian economies after the asian crisis empirical evidence indicates that south east and east asian economies are recovering from the asian crisis with strong output growth driven largely by export growth however output growth in the post crisis period is also accompanied by rising unemployment rates growing government deficits and declining fdi inflows into the south east asian region the declining fdi inflows into south east asia after the crisis is of concern as our empirical results show that fdi is important for output growth in the region our results also suggest that there might have been structural changes in the regional economies that could have led to a downward shift in the output growth of asian economies in the post crisis period this raises the issue of the sustainability of their output growth in the post crisis period

growth and risk sharing with private information abstract we examine the impact of incomplete risk sharing on growth and welfare the source of market incompleteness in our economy is private information a household s idiosyncratic productivity shock is not observable by others risk sharing between households occurs through long term contracts with intermediaries we find that incomplete risk sharing tends to reduce the rate of growth relative to the complete risk sharing benchmark numerical examples indicate that the welfare cost and the growth effect of private information are small

how foreign participation and market concentration impact bank spreads evidence from latin america increasing foreign participation and high concentration levels characterize the recent evolution of banking sectors market structures in developing countries the authors analyze the impact of these factors on latin american bank spreads during the late 1990s their results suggest that foreign banks were able to charge lower spreads relative to domestic banks this was more so for de novo foreign banks than for those that entered through acquisitions the overall level of foreign bank participation seemed to influence spreads indirectly primarily through its effect on administrative costs bank concentration was positively and directly related to both higher spreads and costs

efficiency and economies of scale of large canadian banks the authors measure the economies of scale of canada s six largest banks and their costefficiency over time using a unique panel data set from 1983 to 2003 they estimate pooled translog cost functions and derive measures of relative efficiency and economies of scale

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

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

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

uninsured idiosyncratic production risk with borrowing constraints the author analyzes a general equilibrium model of a heterogeneous agents economy in which the agents are subject to borrowing constraints and uninsurable idiosyncratic production risk

hot money accounting labels and the permanence of capital flows to developing countries an empirical investigation using maximum likelihood kalman filtering techniques and non parametric variance ratio statistics we gauge the relative importance of permanent and temporary components of capital flows to latin american and asian developing countries over the period 1988 1997 for the broad categories of flows in the capital account equity flows ef bond flows bf official flows of commercial bank credit bc and foreign direct investment fdi we find relatively low permanent components in ef bf and of while commercial bc flows appear to contain quite large permanent components and fdi flows are almost entirely permanent these results have a natural interpretation and clear policy implications

optimal taxes on fossil fuel in general equilibrium we analyze a dynamic stochastic general equilibrium dsge model with an externality through climate change from using fossil energy our central result is a simple formula for the marginal externality damage of emissions or equivalently for the optimal carbon tax this formula which holds under quite plausible assumptions reveals that the damage is proportional to current gdp with the proportion depending only on three factors i discounting ii the expected damage elasticity how many percent of the output flow is lost from an extra unit of carbon in the atmosphere and iii the structure of carbon depreciation in the atmosphere thus the stochastic values of future output consumption and the atmospheric co2 concentration as well as the paths of technology whether endogenous or exogenous and population and so on all disappear from the formula we find that the optimal tax should be a bit higher than the median or most well known estimates in the literature we also formulate a parsimonious yet comprehensive and easily solved model allowing us to compute the optimal and market paths for the use of different sources of energy and the corresponding climate change we find coal rather than oil to be the main threat to economic welfare largely due to its abundance we also find that the costs of inaction are particularly sensitive to the assumptions regarding the substitutability of different energy sources and technological progress

heterogeneity aggregate uncertainty and the short term interest rate this article analyzes the relationship between the short term interest rate and diversity i e the number of types in models with heterogeneous agents and incomplete markets the number of types needed to approximate a continuum varies across examples in all cases however the number of types has little effect on the average interest rate and consumption variability in these models the set of state variables is large because the equilibrium law of motion depends on the cross sectional wealth distribution the article shows how to solve these models numerically by approximating the distribution using moments or percentiles

endogenous market incompleteness with investment risks abstract this paper studies a general equilibrium economy in which agents have the ability to invest in a risky technology the investment risk cannot be fully insured with optimal contracts because shocks are private information we show that the presence of investment risks lead to under accumulation of capital relative to an economy where idiosyncratic shocks can be fully insured we also show that the availability of state contingent optimal contracts compared to simple debt contracts brings the aggregate stock of capital close to the complete markets level institutional reforms that make possible the use of these contracts have important welfare consequences

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

is fdi integrating the world economy fdi s spectacular growth in diverse forms during the past two decades represented an important force generating greater economic integration fdi increased substantially in relation to global productive capacity cross border mergers and acquisitions component of fdi put domestic corporate laggards on notice and the spread of fdi to non tradable service sectors generated the possibility that these traditionally low productivity sectors would be brought closer to the standards of international efficiency yet fdi did not perform an integrating role in a more fundamental sense there is little evidence that fdi served to speed up income convergence across countries this was the case for two reasons first fdi flows remained highly concentrated second the benefits from fdi appear to have accrued principally where conditions were already conducive to investment and growth hence though cross country disciplines through bilateral regional and multilateral efforts are important in reducing the distortions that lead to misallocation of capital domestic efforts to raise absorptive capacity will ultimately be critical efforts to increase labour mobility as foreseen for example under gats could have a significant effect in raising the benefits from fdi as the more mobile labour serves to bridge the cultural institutional and contractual differences across nations

an empirical study of applied game theory transmission constrained cournot behavior restructured energy markets present opportunities for the exercise of market power meaning market players can potentially maintain prices in excess of competitive prices in this paper we investigate cournot equilibrium in a simple example network we analyze three market players in a transmission constrained system and consider nonconstant marginal cost several scenarios are evaluated that show a pure strategy equilibrium can break down even when a transmission constraint exceeds the value of the unconstrained cournot equilibrium line flow

financial integration entrepreneurial risk and global dynamics abstract how does financial integration impact capital accumulation current account dynamics and cross country inequality we investigate this question within a two country general equilibrium incomplete markets model that focuses on the importance of idiosyncratic entrepreneurial risk a risk that introduces not only a precautionary motive for saving but also a wedge between the interest rate and the marginal product of capital our contribution is to show that this friction provides a simple explanation for the emergence of global imbalances a resolution to the empirical puzzle that capital often fails to flow from the rich or slow growing countries to the poor or fast growing ones and a set of policy lessons regarding the intertemporal costs and benefits of capital account liberalization

do spillover benefits grow with rising foreign direct investment an empirical examination of the case of china using data from the chinese manufacturing industry for 2001 this article examines the impacts of foreign presence on the performance of locally owned chinese firms our key result supports a curvilinear functional form foreign penetration rates in excess of just about two thirds of industrial capital are associated with declining spillover benefits indicating the dominance of negative spillovers the curvilinear relationship is found to be particularly strong in labour intensive industries contrasting with a standard linear relationship in technology intensive sectors the finding of the complexity of spillover effects challenges the laissez faire view that the more inward foreign direct investment fdi the better and that inward fdi into all types of domestic industry is equally valuable in terms of performance benefits our findings argue for policy measures to strengthen domestically owned chinese industry to provide effective competition to foreign firms and to absorb the benefits from spill

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

wind power and electricity prices at the pjm market increased deployment of wind power generation is changing the landscape of power supply around the world when integrated with electricity markets wind power is also widely known to influence the prices cleared at the market this paper examines the effect of wind power generation on the day ahead market prices in the pjm electricity market using robust econometric models and statistical inference results show that the quantified expected benefits to wholesale market participants may be substantial despite the relatively low wind power penetration levels still observed within the pjm jurisdiction relative to other markets the quantified unitary benefits outweigh by a great margin the renewable energy credits given to qualifying wind farms across the market when benefits outweigh the costs incurred to generate them welfare is accrued to this end benefit allocation mechanisms are proposed which may contribute to the continued development of wind power on the roadmap to a cleaner power industry of the future

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

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

the risk free rate in heterogeneous agent incomplete insurance economies abstract why has the average real risk free interest rate been less than one percent the question is motivated by the failure of a class of calibrated representative agent economies to explain the average return to equity and risk free debt i construct an economy where agents experience uninsurable idiosyncratic endowment shocks and smooth consumption by holding a risk free asset i calibrate the economy and characterize equilibria computationally with a borrowing constraint of one year s income the resulting risk free rate is more than one percent below the rate in the comparable representative agent economy

idiosyncratic production risk growth and the business cycle we introduce a neoclassical growth economy with idiosyncratic production risk and incomplete markets each agent is an entrepreneur operating her own technology with her own capital stock the general equilibrium is characterized by a closed form recursion in the cara normal case incomplete markets introduce a risk premium on private equity which reduces the demand for investment as compared to complete markets the steady state can thus have both a lower capital stock due to investment risk and a lower interest rate due to precautionary savings furthermore the anticipation of high real interest rates in the future feeds back into high risk premia and low investment in the present thus slowing down convergence to the steady state our results highlight the importance of private risk premia for capital accumulation and business cycles

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

money and capital in a persistent liquidity trap abstract using a monetary model with asset scarcity we show that a liquidity trap caused by a persistent deleveraging shock increases real cash holdings and decreases investment and output in the medium term this medium term supply side effect arises when firms face financial constraints policy implications differ from shorter run analyses implied by nominal rigidities quantitative easing leads to a deeper liquidity trap exiting the trap by increasing expected inflation or applying negative interest rates does not solve the asset scarcity problem a higher government debt helps exiting the liquidity trap and reduces asset scarcity but may hurt investment in the medium run

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

multicommodity spatial cournot model for generator bidding analysis conventional behavioral models such as cournot to analyze generator behavior do not reflect many of the complexities of advanced electricity markets dispatch and pricing in a number of advanced pool based electricity markets worldwide explicitly recognize the co optimization of ancillary services as well as transmission constraints this paper discusses the development of and experiments with a multimarket cournot model that deals with co optimization of multiple commodities namely energy and various classes of ancillary services and deals with transmission constraints that separate these commodity markets spatially we also discuss the multimarket extension of the cournot model to deal with bilateral contracts for energy a nonlinear programming formulation of the proposed model and the analysis of nodal prices are presented followed by a detailed set of experiments using a simple three node system the model is expected to add to understanding of complex interactions between energy and ancillary services markets and further the impact transmission capacity limits may have on exercise of market power of each of these markets

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

the term structure of interest rates in real and monetary economies abstract this paper modifies standard asset pricing models by introducing capital a variable labor supply and money a surprising but very positive result is that in a real production economy the interest rate is close to a random walk this result is found to be true even if there is no persistence in the driving process of the model in this paper we generalize the standard cash in advance constraint by using a shopping time technology this generalization makes it possible to match observed variability for the velocity of money this type of monetary model however is not successful in matching observed behavior of bond prices