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The Location Choices of Foreign Investors: A District-level Analysis in India

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  • Megha Mukim
  • Peter Nunnenkamp

Abstract

This paper analyzes the determinants of the location choices made by foreign investors at the district level in India to gauge the relative importance of economic geography factors, local business conditions, and the presence of previous foreign investors. We employ a discrete-choice model and Poisson regressions to control for the potential violation of the assumption of Independence of Irrelevant Alternatives. Our sample includes about 19,500 foreign investment projects approved in 447 districts from 1991-2005. We find that foreign investors strongly prefer locations where other foreign investors are. They are also attracted to industrially diverse locations and those with better infrastructure. We conclude that the concentration of FDI in a few locations could fuel regional divergence in post-reform India

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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1628.

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Length: 38 pages
Date of creation: Jun 2010
Date of revision:
Handle: RePEc:kie:kieliw:1628

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Keywords: FDI; economic geography; location choice; infrastructure;

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References

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  1. Cletus C. Coughlin & Eran Segev, 1999. "Foreign direct investment in China: a spatial econometric study," Working Papers, Federal Reserve Bank of St. Louis 1999-001, Federal Reserve Bank of St. Louis.
  2. Marius Brülhart & Mario Jametti & Kurt Schmidheiny, 2007. "Do agglomeration economies reduce the sensitivity of firm location to tax differentials?," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 1062, Department of Economics and Business, Universitat Pompeu Fabra.
  3. Nicolas Coeurdacier & Roberto A. de Santis & Antonin Aviat, 2009. "Cross-border mergers and acquisitions and European integration," Sciences Po publications info:hdl:2441/c8dmi8nm4pd, Sciences Po.
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Citations

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Cited by:
  1. Mukim, Megha, 2013. "Coagglomeration of formal and informal industry : evidence from India," Policy Research Working Paper Series 6622, The World Bank.
  2. Megha Mukim, 2011. "Industry and the urge to cluster: a study of the informal sector in India," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 33592, London School of Economics and Political Science, LSE Library.
  3. Peter Nunnenkamp & Maximiliano Sosa Andrés & Krishna Chaitanya Vadlamannati & Andreas Waldkirch, 2012. "What Drives India’s Outward FDI?," Kiel Working Papers 1800, Kiel Institute for the World Economy.
  4. Frank Bickenbach & Wan-Hsin Liu & Peter Nunnenkamp, 2013. "Regional Concentration of FDI in Post-reform India: A District-level Analysis," Kiel Working Papers 1854, Kiel Institute for the World Economy.
  5. Andrea Gauselmann & Philipp Marek & J. P. Angenendt, 2011. "MNE’s Regional Location Choice - A Comparative Perspective on East Germany, the Czech Republic and Poland," IWH Discussion Papers, Halle Institute for Economic Research 8, Halle Institute for Economic Research.
  6. Andrea Gauselmann & Philipp Marek, 2012. "Regional determinants of MNE’s location choice in post-transition economies," Empirica, Springer, Springer, vol. 39(4), pages 487-511, November.
  7. Andrea Gauselmann & Philipp Marek, 2011. "Regional Determinants of MNE's Location Choice in Transition Economies," WIFO Working Papers, WIFO 412, WIFO.
  8. Kusi Hornberger & Joseph Battat & Peter Kusek, 2011. "Attractive FDI : How Much Does Investment Climate Matter?," World Bank Other Operational Studies 11060, The World Bank.

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