Does FDI in Manufacturing Cause FDI in Business Services? Evidence from French Firm-Level Data
AbstractThis paper uses a large French firm-level data set to evaluate the determinants of location choices in services. In a first step, estimates for four broad services sectors are compared with the estimates for the manufacturing sector. Using a discrete choice model, we find that this framework does fairly well in explaining location choices in services and that the parameter estimates for services are close to the ones for manufacturing. We then investigate whether the similarity in estimated parameters is due to a complementarity between location choices in manufacturing and in services, in the sense that manufacturing location choices may cause the location of services. A particularly appropriate services sector, for this purpose is the business services sector, for which input-output linkages with the manufacturing sector are particularly strong. It is found that the downstream demand of French manufacturing firms has a positive effect on the location choice probabilities of French business services firms. This effect is robust.
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Bibliographic InfoPaper provided by CEPII research center in its series Working Papers with number 2007-21.
Date of creation: Dec 2007
Date of revision:
International firms; International trade models and databases; FDI; Gravity model; services;
Other versions of this item:
- Benjamin Nefussi & Cyrille Schwellnus, 2010. "Does FDI in manufacturing cause FDI in business services? Evidence from French firm-level data," Canadian Journal of Economics, Canadian Economics Association, vol. 43(1), pages 180-203, February.
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- F15 - International Economics - - Trade - - - Economic Integration
- L80 - Industrial Organization - - Industry Studies: Services - - - General
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