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The Geographic Distribution of Economic Activities of the USA Multinational Enterprises

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  • Felipa Mello Sampayo

Abstract

This paper 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 internalisation 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 share version of the gravity model over its classical formulation. A panel data cointegration-type analysis between FDI and GDP, and per capita income differential suggests that GDP has a positive impact on FDI, but provide mixed evidence as to whether per capita income differential reflects demand or supply determinants of FDI. Causality tests between income, income differential and FDI points to FDI playing a positive role on economic growth and convergence.

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Bibliographic Info

Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c011_040.

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Length: 45 pages
Date of creation: Jun 2006
Date of revision:
Handle: RePEc:deg:conpap:c011_040

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Keywords: Foreign direct investment; multinational enterprises; gravity model; dynamic panel data model; panel data cointegration;

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