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Bilateral FDI potentials for Austria

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  • Peter Egger

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Abstract

Trade economists have for long considered gravity models to estimate unexhausted potentials for bilateral trade. Similar to the discrepancy between "normal" and "actual" bilateral trade, one may ask the question about the difference between "normal" and actual bilateral multinational activity. However, with multinational activity, zero bilateral data and heteroscedasticity are very important, even more so than with trade data. Therefore, this paper suggests using generalized linear rather than log-linear models to specify "normal" FDI and obtain estimates of unexhausted FDI potentials. I use panel data on Austria?s bilateral multinational activity across 25 countries and 7 country-blocs, 4 sectors and 13 years to illustrate the disadvantage of log-linear model estimation at quasi-maximum likelihood estimation.

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File URL: http://hdl.handle.net/10.1007/s10663-009-9116-5
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Bibliographic Info

Article provided by Springer in its journal Empirica.

Volume (Year): 37 (2010)
Issue (Month): 1 (February)
Pages: 5-17

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Handle: RePEc:kap:empiri:v:37:y:2010:i:1:p:5-17

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Web page: http://www.springerlink.com/link.asp?id=100261

Related research

Keywords: Multinational activity; Gravity model; Trade potentials; F14; F15; F21; F23;

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References

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  1. Felbermayr, Gabriel & Kohler, Wilhelm K., 2006. "Exploring the intensive and extensive margins of world trade," Munich Reprints in Economics 20610, University of Munich, Department of Economics.
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  3. Peter Egger & Mario Larch & Kevin E. Staub & Rainer Winkelmann, 2011. "The Trade Effects of Endogenous Preferential Trade Agreements," American Economic Journal: Economic Policy, American Economic Association, vol. 3(3), pages 113-43, August.
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  5. Bergstrand, Jeffrey H. & Egger, Peter, 2007. "A knowledge-and-physical-capital model of international trade flows, foreign direct investment, and multinational enterprises," Journal of International Economics, Elsevier, vol. 73(2), pages 278-308, November.
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  7. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
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Citations

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Cited by:
  1. Octavio Escobar, 2011. "The location pattern of FDI in Mexico after NAFTA," ERSA conference papers ersa10p804, European Regional Science Association.
  2. Badi H. Baltagi & Peter Egger & Michael Pfaffermayr, 2014. "Panel Data Gravity Models of International Trade," CESifo Working Paper Series 4616, CESifo Group Munich.
  3. Escobar Gamboa, Octavio Romano, 2012. "Foreign direct investment (FDI) determinants and spatial spillovers across Mexico's states," Economics Papers from University Paris Dauphine 123456789/10605, Paris Dauphine University.

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