Determinants of Foreign Direct Investment

49 Pages Posted: 19 Jan 2011 Last revised: 15 May 2014

See all articles by Bruce A. Blonigen

Bruce A. Blonigen

University of Oregon - Department of Economics; National Bureau of Economic Research (NBER)

Jeremy Piger

University of Oregon - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: January 2011

Abstract

Empirical studies of bilateral foreign direct investment (FDI) activity show substantial differences in specifications with little agreement on the set of covariates that are (or should be) included. We use Bayesian statistical techniques that allow one to select from a large set of candidates those variables most likely to be determinants of FDI activity. The variables with consistently high inclusion probabilities are traditional gravity variables, cultural distance factors, parent-country per capita GDP, relative labor endowments, and regional trade agreements. Variables with little support for inclusion are multilateral trade openness, host country business costs, host-country infrastructure (including credit markets), and host-country institutions. Of particular note, our results suggest that many covariates found significant by previous studies are not robust.

Suggested Citation

Blonigen, Bruce A. and Piger, Jeremy M., Determinants of Foreign Direct Investment (January 2011). NBER Working Paper No. w16704, Available at SSRN: https://ssrn.com/abstract=1743323

Bruce A. Blonigen (Contact Author)

University of Oregon - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Jeremy M. Piger

University of Oregon - Department of Economics ( email )

Eugene, OR 97403
United States

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