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Does Foreign Direct Investment Promote Regional Development in Developed Countries? A Markov Chain Approach for US States

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Author Info
Eckhardt Bode
Peter Nunnenkamp

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Abstract

This paper investigates the effects of inward FDI on per-capita income and growth of the US states since the mid-1970s. Using a Markov chain approach, it shows that both quantitative and qualitative characteristics of FDI affect per-capita income and growth. Employment-intensive FDI, concentrated in richer states, has been conducive to income growth, while capital-intensive FDI, concentrated in poorer states, has not. FDI has consequently tended to slow down rather than foster income convergence among US states. It appears to be less important whether FDI has been undertaken in the manufacturing sector of US states or in other sectors.

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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1374.

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Length: 32 pages
Date of creation: Aug 2007
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Handle: RePEc:kie:kieliw:1374

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Related research
Keywords: Markov transition probability likelihood ratio test FDI per-capita income regional development United States of America

Find related papers by JEL classification:
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
O18 - Economic Development, Technological Change, and Growth - - Economic Development - - - Regional, Urban, and Rural Analyses
O51 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada

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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Elias Ajaga & Peter Nunnenkamp, 2008. "Inward FDI, Value Added and Employment in US States: A Panel Cointegration Approach," Kiel Working Papers 1420, Kiel Institute for the World Economy. [Downloadable!]
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