the spatial organization of multinational firms using six years of firm level data covering 224 regions of the enlarged european union we evaluate the importance to a firm of locating its activities production headquarters r d logistics and sales close together we find that after controlling for regional characteristics being closely located to a previous investment positively affects firm location choice however the impact of distance is dependent on the type of investment production or service the impact dies out faster for service activities finally we show that a surprisingly positive effect comes from locating a new production plant close to an existing production investment but in another country

the effect of tax treaties on multinational firms new evidence from microdata this paper uses affiliate level data from swedish multinationals to examine the impact of tax treaties on both overall affiliate sales and the composition of those sales in line with previous results we find little evidence for an effect of treaties on the level of total sales we do however find that a tax treaty increases the probability of investment by a firm in a given country in addition we find that a treaty reduces exports to the parent but increases imports of intermediate inputs from the parent this is consistent with treaties increasing the effective host tax this suggests that tax treaties impact the behavior of multinationals along some dimensions but not along others

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

the indirect effects of foreign direct investment on trade a network perspective the relationship between international trade and foreign direct investment fdi is one of the main features of globalisation in this paper we investigate the effects of fdi on trade from a network perspective since fdi takes not only direct but also indirect channels from origin to destination countries because of firms incentive to reduce tax burden to minimise coordination costs and to break barriers to market entry we use a unique data set of international corporate control as a measure of stock fdi to construct a corporate control network ccn where the nodes are the countries and the edges are the corporate control relationships network measures as the shortest path length and the communicability are then computed on the ccn to capture the indirect channel of fdi empirically we find that corporate control has a positive effect on trade both directly and indirectly the result is robust with different specifications and estimation strategies hence our paper provides strong empirical evidence of the indirect effects of fdi on trade moreover we identify a number of interplaying factors such as regional trade agreements and the region of asia we also find that the indirect effects are more pronounced for the manufacturing sector than for primary sectors such as oil extraction and agriculture

the spatial interdependence of fdi in latin america summary using a sample of 17 latin american countries with observations during 1986 2006 two forms of spatial interdependence of foreign direct investment fdi are explored 1 surrounding market potential and 2 spatial autocorrelation we find that surrounding market potential has a positive significant effect on net fdi but there is no evidence that fdi is spatially autocorrelated other factors that show a significant positive effect on fdi include control of corruption and exports of raw materials when considering only fdi inflows from the us we find that fdi is spatially autocorrelated and that surrounding market potential is not significant

a spatial model of corporate tax incidence using a unique self compiled data set on international tax rates we explore the link between taxes and manufacturing wages for a panel of 66 countries over 25 years we find controlling for other macroeconomic variables that wages are significantly responsive to corporate taxation higher corporate tax rates depress wages using spatial modelling techniques we also find that tax characteristics of neighbouring countries whether geographic or economic have a significant effect on domestic wages we test for and reject spatial autocorrelation in our model using a modification of the moran i test statistic that accounts for country specific fixed effects in a panel data setting our article fits in with the new economic geography literature as well as the urban economics literature which attempt to explain the spatial distribution of wages

are tax havens good neighbours fdi spillovers and developing countries abstractthis paper investigates the impact of tax havens on non tax haven countries in terms of foreign direct investment fdi we analyze the importance of agglomeration effects by including fdi inflow levels in tax havens and capture geographic spillovers by measuring proximity to the nearest tax haven our analysis yields several interesting findings first using panel data for 142 countries we find evidence of positive spillovers from tax havens to nearby developing countries but not to nearby developed countries second restricting our panel to developing countries we find the positive effect of tax haven fdi on developing countries to be robust third we find that geographic distance matters for financial flows developing countries which are the closest to a nearby tax haven benefit the most in terms of fdi inflows this result is robust to accounting for spatial interdependence of fdi

international comovement of economic fluctuations a spatial analysis summary we consider the comovement of economic volatility across multiple countries using spatial models with data from 187 countries over the period of 1960 2007 we find a strong spatial comovement of economic volatility more interestingly the effect of geographical proximity on economic volatility comovement is strongest during the period of international shocks 1973 86 but almost disappears over the globalization era 1987 2007 by way of contrast the influence of trade relations in determining the comovement of economic volatility is significant over 1987 2007

does institutional change spread across countries explaining spatial patterns in human rights if a country improves its human rights record will neighbouring countries benefit beneficial spillovers could justify intervention by the un or one of the many other organisations that internationally fight human rights violations we document that countries human rights performances often resemble the human rights situation of their neighbours however exploiting time variation in a spatial panel we find that much of that resemblance is simply determined by the shared geographical location changes in neighbouring countries have little influence on local human rights suggesting that contemporaneous spillovers and interactions are limited

optimal inventory policy with supply uncertainty and demand cancellation we consider a periodic review model where the firm manages its inventory under supply uncertainty and demand cancellation we show that because of supply uncertainty the optimal inventory policy has the structure of re order point type that is we order if the initial inventory falls below this re order point otherwise we do not order this is in contrast to the work of yuan and cheung 2003 who prove the optimality of an order up to policy in the absence of supply uncertainty we also investigate the impact of supply uncertainty and demand cancellation on the performance of the supply chain using our model we are able to quantify the importance of reducing the variance of either the distribution of yield or the distribution of demand cancellation the single multiple periods and the infinite horizon models are studied

is the forward bias economically small evidence from european rates abstract for the purpose of testing uncovered interest parity uip rates of european currencies against the mark offer a distinct advantage the admissible band of the exchange rate mechanism erm induces statistically significant mean reversion in weekly rates thus unlike for freely floating rates there is an expectation signal that has non trivial variation and is sufficiently traceable for research purposes when running the standard regression tests of the unbiased expectations hypothesis at the one week horizon we nevertheless obtain essentially zero coefficients for intra ems exchange rates and the familiar negative coefficients for extra ems rates even more puzzlingly lagged exchange rate changes remain significant when added to the regression a feature that seems hard to explain as a missing variable effect the deviation from uip is significant not just statistically but also economically trading rule tests reveal that for sufficiently large filters the average profit per trade exceeds transaction costs and that cumulative gains can be quite impressive the size of the profits and the patterns from buy versus sell decisions also allow us to reject the hypotheses of either a risk premium or peso issues about realignments as sufficient explanations

green havens and pollution havens we test for pollution haven effects in outward foreign direct investment fdi for different sectors using a comprehensive and exhaustive data set for outward fdi from the netherlands one of the most environmentally stringent countries and a major source of global fdi our evidence suggests that in the sectors natural resources extraction and refining construction retail food processing beverages and tobacco and utilities a less stringent environmental policy in the host country significantly attract fdi what is important for these pollution haven effects is not only regulation but also enforcement of environmental policy in contrast to earlier results it is not only footloose industries that display pollution haven effects but also the traditional pollution intensive industries but for the machines electronics and automotive and transportation and communication sectors a more stringent and better enforced environmental policy attracts more fdi as this may help their reputation for sustainable management and csr these sectors display green haven effects these findings have important implications for the sector distribution of fdi in destination countries

economic impact assessment of mega infrastructure pipeline projects the economic development features for the decades after the second world war provide evidence that investments to new infrastructures are a key driver in strengthening the national economy and enhancing nation s productivity as it creates economic benefits and additional income however the decision for fund allocation and investments in mega infrastructure pipeline projects often must be made in conditions that are much more fraught with uncertainty the key question in such decisions is if the economic impact caused by the new project could be able to essentially boost the economy by creating new jobs and generating new income on one hand and which are the business sectors expected to archive the benefits of this investment this article deals with the estimation of the mega infrastructure pipeline project economic effects in economy the methodological framework is based on input output approach providing quantitative estimations about the economic impact of the project in terms of new income and jo

the complex integration strategies of multinationals and cross country dependencies in the structure of foreign direct investment abstract the behavior of many multinational enterprises is not well described by existing models of foreign direct investment fdi firms often follow strategies that involve vertical integration in some countries and horizontal integration in others a strategy known as complex integration this paper presents a three country model that is used to analyze why firms might follow a strategy of complex integration my analysis reveals that complex integration strategies create complementarities between potential host countries that have important implications for the structure of fdi the analysis also shows that falling transport cost between countries may increase the importance of complex integration strategies

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

u s canada trade liberalization and mnc production location using confidential firm level panel data from the bureau of economic analysis we examine how the bilateral trade flows of u s multinational corporations mncs and their canadian affiliates responded to u s canadian tariff reductions from 1983 to 1992 we find that canadian affiliate sales to the united states are negatively correlated with canadian tariffs but u s parent sales to canadian affiliates have little association with canadian tariffs these results contradict the notion that canadian tariff reductions would lead to a hollowing out of canadian manufacturing we also find substantial heterogeneity in mnc responses to tariff changes within narrowly defined manufacturing industries overall bilateral trade liberalization is trade creating as u s mncs integrated their north american production such that canadian affiliates increased sales to the united states and reduced domestic sales

how far away is an intangible services fdi and distance foreign direct investment fdi in services has grown significantly in recent years evidence of spatial relationships in fdi decisions have been provided for goods manufacturing by utilising physical distance based measures of trade costs this paper investigates spatial interactions for services fdi using several distance measures including physical distance genetic distance and transport time across different measures of distance the traditional determinants of outbound fdi activity remain valid for services we also find spatial interdependence for services fdi that is generally supportive of export platform fdi

export platform foreign direct investment theory and evidence this paper proposes a model that accounts for export platform fdi a form of fdi that is common in the data but rarely discussed in the theoretical literature unlike the previous literature this paper s theory nests all the typical modes of supply including exports horizontal and vertical fdi horizontal and vertical export platform fdi the theory yields the testable hypothesis that a decrease in either inter regional or intra regional trade costs induces firms to choose export platform fdi the empirical analysis provides descriptive statistics that point to large proportions of third country exports of us fdi and an econometric analysis whose results are in line with the model s predictions the paper suggests policy implications for nations seeking to attract fdi

a race to the bottom employment protection and foreign direct investment a common critique of globalization is that it leads to a race to the bottom specifically it is assumed that multinationals invest in countries with lower regulatory standards and that countries competitively undercut each other s standards in order to attract foreign capital this paper tests this hypothesis and finds robust empirical support for both predictions first a reduction in employment protection rules leads to an increase in foreign direct investment fdi furthermore changes in employment protection legislation have a larger impact on the relatively mobile types of fdi second there is evidence that countries are competitively undercutting each other s labor market standards

international corporate taxation and u s multinationals behaviour an integrated approach this paper explores the effects of corporate taxation on u s capital invested abroad and on tax planning practices the econometric analysis first indicates that investment is strongly influenced by average tax rates with a magnified impact particularly for low tax rates implying that the attractiveness of low tax countries is not weakened by anti deferral rules and cross crediting limitations further explorations suggest that firms report higher profit higher subpart f income and are less likely to repatriate dividends when they are located in low tax jurisdictions finally when the role of effective transfer pricing regulations is estimated it appears that low degrees of law enforcement are associated with higher income shifting ce memoire s interesse aux effets des impots sur le revenu des societes sur l investissement et les pratiques de planifications fiscales des firmes multinationales americaines l analyse econometrique indique que l investissement americain est fortement influence par le taux d imposition moyen et que cet impact est sensiblement plus important pour de faibles taux d imposition ceci suggere que l attractivite des pays a faible imposition n est pas affaiblie par les limites imposees par le systeme fiscal americain sur la possibilite de differer l impot et sur les moyennes de credit des tests additionnels montrent que les firmes reportent un profit ainsi qu un revenu subpart f plus important et rapatrient moins leurs dividendes lorsqu elles sont localisees dans des pays a faible imposition finalement en estimant le role joue par l efficacite des reglementations en termes de prix de transferts il apparait qu un faible etat de droit est associea de plus fortes manipulations fiscales

multinationals multi plant economies and the gains from trade a general equilibrium model of a multinational enterprise based on economies of multi plant operation is developed these economies are modelled as arising from the existence of a joint input whose productivity in each production facility is independent of the number of facilities maintained by a firm the multinational thus offers the world increased technical efficiency by eliminating the duplication of the joint input that would occur with independent national firms since this technical efficiency may come at the expense of increased market power the full determinants of home country host country and world welfare are considered

testing the pollution haven effect does the type of fdi matter many studies have tested the pollution haven effect phe which predicts that the tightening of local environmental regulations would shift foreign direct investment fdi to less regulated jurisdictions however most of them ignored the heterogeneity of fdi this paper studies the phe on local market oriented and export oriented fdi and tests whether the two types have different responsiveness to environmental regulations in a host country a simple model is developed to describe how different types of multinational companies respond in distinct ways to stricter environmental policies in host countries using us outward fdi data for 50 host countries and a survey measure of both the stringency and the enforcement of local environmental regulations i find a significant deterrent effect of local environmental regulations on inward fdi furthermore fdi in a host country is not only affected by local environmental regulations but also by environmental regulations in proximate countries more importantly accounting for the relative stringency of environmental regulations between a host country and the united states is critical for identifying a phe i find a significantly stronger effect of environmental policies on both types of fdi in host countries with environmental regulations that are stricter than those in the united states in these countries export oriented fdi also exhibits a greater sensitivity to local environmental regulations than local market oriented fdi

size location and agglomeration of inward foreign direct investment fdi in the united states halvorsen t size location and agglomeration of inward foreign direct investment fdi in the united states regional studies since the late 1970s a range of economic development policies to attract foreign direct investments fdis have been tried out despite a policy reorientation from a large size bias to policies also favouring smaller investments little empirical work has been performed on the determinants of investment size this paper presents empirical evidence on how the size of fdis is determined by agglomeration and other state level factors the results indicate that fdi agglomeration and urbanization affect investment size and that taxes markets labour land and the concentration of scientific knowledge are important determinants in the size composition of fdi halvorsen t le montant la localisation et l agglomeration de l investissement direct etranger ide aux etats unis regional studies depuis la fin des annees 1970 on met en vigueur toute une serie de politiques de developpeme

public information and performance the role of spatial dependence in the worldwide governance indicators among african countries summary the worldwide governance indicators wgi provide transparent and comparable country statistics for different dimensions of governance linked to under development yet does the public availability of governance data actually enhance performance if investors donor agencies and citizens are made aware of relative governance performance competition for inward investment such as fdi and oda and domestic legitimacy become plausible mechanisms for diffusion of good governance we test whether such mechanisms operate using the wgi for africa and find evidence for spatial diffusion of democracy rule of law and corruption control there is no evidence for diffusion of regulatory quality and government effectiveness

the effect of fdi on child labor abstract this paper examines the effect of fdi on child labor using 1995 data for 145 countries we find that contrary to common fears fdi is negatively correlated with child labor this effect disappears when controlling for per capita income after doing so we find no robust effect of either fdi or international trade on child labor this result is robust to corrections for the endogeneity of fdi trade and income furthermore this result is confirmed using data from earlier years this suggests that the impact of fdi and trade on child labor if any is the increases in income they generate

evolution of bilateral capital flows to developing countries at intensive and extensive margins motivated by the rise in capital flows to low income countries lics we examine the nature of these flows and the factors affecting foreign investors decision recognizing the presence of fixed investment costs we analyze capital flows at both intensive and extensive margins to fix ideas we resort to the gravity literature for the estimating relationships which we embed into a two tier econometric framework with cross sectional dependence our main finding is that market entry costs are statistically and economically very detrimental to lics we also obtain the gravity type relationship for the destination income unconditionally but not after conditioning on relevant variables as well as establish labor productivity as a robust attractor of capital inflows

fiscal policy and the firm do low corporate tax rates attract multinational corporations the existing literature on the political economy of taxation explores how the mobility of firms affects the ability of governments to tax capital in this article the author tests the relationship

greenfield versus merger acquisition fdi same wine different bottles relying on a large foreign direct investment fdi transaction level dataset unique both in terms of disaggregation and time and country coverage this paper examines patterns in greenfield gf versus merger acquisition ma investment although both are found to seek out large markets with low international barriers important differences emerge ma is more affected by geographic and cultural barriers and exhibits opportunistic behaviours as it is more sensitive to short run changes such as a currency crisis on the other hand gf is relatively driven by long run factors such as origincountry technological and institutional development or comparative advantage these empirical facts are consistent with the conceptual distinction made between these two modes i e ma involves transfer of ownership for integration or arbitrage reasons while gf relies on firms own capacities which are linked to the origin countries attributes they also suggest that gf and ma are likely to respond differently to policies intended to attract fdi

in search of spatial interdependence of us outbound fdi in the mena region the paper investigates the spatial interdependence of us mne investments in the mena region given the variations in resource endowments governance structures and degree of infrastructure availability in mena countries one would expect these variables to affect an mne s choice of fdi location we do find that domestic non spatial factors such as own country inflation and governance measured by bureaucratic quality as well as infrastructure affect a host country s inward fdi we also found that only one measure of natural resource endowment that is oil and gas exports were instrumental in attracting fdi this non spatial result is generally robust and invariant to the two methodologies employed in this study that is the spatially autoregressive sar model and the spatial durbin model sdm we found that neighbouring countries infrastructure availability measured either by electricity used or energy used affected fdi inflows in a host country however this spatial impact was found only in the sdm model the spatial effects of neighbouring countries economic and political conditions and resource endowments were however not observed on a host country s inward fdi the insignificance of both the surrounding market potential and the spatially weighted fdi suggests a purely horizontal motive of mne investments in the mena region

dyadic military conflict security alliances and bilateral fdi flows although multinationals operate under cross border jurisdictions the relevance of interstate security relations to international business has received little attention despite the impressive accumulation of knowledge in international business and international relations the two intellectual communities have largely ignored the insights from each other in this article we seek to bridge this gap we argue that interstate military conflict and security alliances as two central features of interstate security relations often change both government policies toward international business and investor expectations of political risk from the perspectives of both states and investors military conflict should reduce bilateral investment whereas security alliances increase it our empirical analysis applies the system gmm estimator to a gravity model of bilateral investment flows for 1117 directed dyads among 58 countries from 1980 to 2000 among 18 countries whose per capita real incomes remain consistently above 12 000 constant dollars the security factors do not affect bilateral investment in the high income low income dyads interstate military conflict and security alliances significantly influence bilateral investment as expected the findings depict two separate realms in which international politics does and does not interfere with international business helping us improve political risk assessments and understand the interactions between states and firms

the effect of the euro on foreign direct investment abstract in this paper the recent effect of the european monetary union on inward fdi flows is examined using a difference in differences approach the estimated results show that the introduction of the euro raised inward fdi flows by approximately 16 within the euro area by approximately 11 to non members and weakly by around 8 from non member countries into the euro area moreover the geographical effects of the euro are explored the results show partial agglomeration tendencies for the euro area there are also some indications of increased importance of vertical specialization in the sample

split panel jackknife estimation of fixed effect models we propose a jackknife for reducing the order of the bias of maximum likelihood estimates of nonlinear dynamic fixed effect panel models in its simplest form the half panel jackknife the estimator is just 2 hat theta bar theta 1 2 where hat theta is the mle from the full panel and bar theta 1 2 is the average of the two half panel mles each using t 2 time periods and all n cross sectional units this estimator eliminates the first order bias of hat theta the order of the bias is further reduced if two partitions of the panel are used for example two half panels and three 1 3 panels and the corresponding mles on further partitioning the panel any order of bias reduction can be achieved the split panel jackknife estimators are asymptotically normal centered at the true value with variance equal to that of the mle under asymptotics where t is allowed to grow slowly with n in analogous fashion the split panel jackknife reduces the bias of the profile likelihood and the bias of marginal effect estimates simulations in fixed effect dynamic discrete choice models with small t show that the split panel jackknife effectively reduces the bias and mean squared error of the mle and yields confidence intervals with much better coverage

fdi in space spatial autoregressive relationships in foreign direct investment abstract there are a number of theoretical reasons why foreign direct investment fdi into a host country may depend on the fdi in proximate countries such spatial interdependence has been largely ignored by the empirical fdi literature with only a couple recent papers accounting for such issues in their estimation this paper conducts a general examination of spatial interactions in empirical fdi models using data on us outbound fdi activity we find that estimated relationships of traditional determinants of fdi are surprisingly robust to inclusion of terms to capture spatial interdependence even though such interdependence is estimated to be significant however we find that both the traditional determinants of fdi and the estimated spatial interdependence are quite sensitive to the sample of countries one examines

foreign direct investment in china a spatial econometric study foreign direct investment fdi began to flow into china with advent of reforms in 1978 following a period of relatively slow growth fdi inflows to china picked up after 1990 as china surpassed every other nation but the united states in attracting foreign investment in particular coastal regions of china have received the bulk of fdi inflows to the country in this paper we use province level data to explain the pattern of fdi location across china we build upon previous research introducing new potential determinants using more recent fdi data and incorporating spatial econometric techniques in doing so we test for potential econometric problems arising from the spatial pattern of the data and correct for them by running more appropriate models we find that economic size labor productivity and coastal location attract fdi while higher wages and illiteracy rates deter it the transportation infrastructure variables we try are not found to have statistically significant relationships with the level of fdi inflows across provinces this abstract was borrowed from another version of this item

the location choices of foreign investors a district level analysis in india this paper analyzes the determinants of the location choices made by foreign investors at the district level in india to gauge the relative importance of economic geography factors local business conditions and the presence of previous foreign investors we employ a discretechoice model and poisson regressions to control for the potential violation of the assumption of independence of irrelevant alternatives our sample includes about 19 500 foreign investment projects approved in 447 districts from 1991 2005 we find that foreign investors strongly prefer locations where other foreign investors are they are also attracted to industrially diverse locations and those with better infrastructure we conclude that the concentration of fdi in a few locations could fuel regional divergence in post reform india

the impact of capital market integration on educational choice and the consequences for economic growth this paper examines the impact of capital market integration on higher education and the link to economic growth the analysis takes into account that participation in higher education is non compulsory and depends on individual choice due to capital skill complementarity integration increases reduces the incentives to participate in higher education in capital importing exporting economies all other things equal from a national policy point of view public education expenditure should increase after integration of similar economies in order to attract mobile capital using foreign direct investment as a measure of capital flows we present empirical evidence which largely confirms our main hypothesis an increase in net capital inflows in response to capital market integration raises participation in higher education in addition we show that the adjustment in educational attainment is an empirically relevant channel through which capital inflows foster economic growth

free trade agreements and foreign direct investment the role of endogeneity and dynamics this article studies the impact of free trade agreements fta on outbound foreign direct investment fdi from one perspective fta may promote fdi since fta aim to promote economic activity between countries however lower trade barriers may lower the incentive of firms to conduct fdi therefore the net impact is an empirical question using a panel of countries for the years 1990 2006 this article effectively controls for participation in an fta when analyzing the impact on outbound fdi the lengthy time series also allows us to examine effectively the dynamic nature of the relationship failing to account for endogeneity and dynamics would likely generate inaccurate conclusions regarding the impact of fta on outbound fdi our analysis finds that outbound fdi is either unrelated to participation in an fta or is negatively affected

sovereign wealth funds cross border investments assessing the role of country level drivers and spatial competition abstract the aim of this paper is to identify the driving forces of cross border investments emanating from sovereign wealth funds and to test the existence of spatial competition among recipient countries for this we develop an original econometric framework that quantifies the role of spatial dependence in the location of investments and that uses a modified version of the standard estimation procedure of spatial panel model which accommodates the inverse hyperbolic sine transformation of the dependent variable this transformation copes with two critical features of net capital flows namely an highly skewed distribution and the presence of zero and negative values using a large scale database we provide evidence of negative spatial dependence investments in one country being on average at the expense of its neighbors

a race to the bottom in labor standards an empirical investigation abstract one of the concerns over globalization is that as nations compete for investment they relax labor standards to attract firms using spatial estimation on panel data for 135 countries over 17 years we find that the labor standards in one country are positively correlated with those elsewhere i e a cut in labor standards in other countries reduces labor standards in the country in question this interdependence is more evident in labor practices i e enforcement than in labor laws further while we find evidence of competition in both developed and developing countries it is strongest among developing countries with weak standards