Fixed Costs, Foreign Direct Investment, and Gravity with Zeros
AbstractFixed costs play a crucial role in current models of foreign direct investment (FDI), yet they are almost entirely ignored in empirical treatments of FDI. We fill this gap by using a 1989-2001 panel of FDI flows into Iceland to examine the determinants of fixed costs for multinational firms and how these influence aggregate patterns of investment. Our additions to research in the field include usage of several natural resource variables, and the analysis of data on initial entry of FDI into a developed country. We use Heckman two step procedure, which allows us to account for fixed costs and their impact on estimation. Taken together, we find that the standard OLS approach to the data incorrectly links the quantity of FDI to source country variables while in fact most of their role is in determining whether FDI takes place at all.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Oregon Economics Department in its series University of Oregon Economics Department Working Papers with number 2006-17.
Date of creation: 10 Apr 2003
Date of revision: 10 Jun 2003
Contact details of provider:
Postal: 1285 University of Oregon, 435 PLC, Eugene, OR 97403-1285
Phone: (541) 346-4661
Fax: (541) 346-1243
Web page: http://economics.uoregon.edu/
More information through EDIRC
Foreign Direct Investment; Multinational Enterprise; Fixed Costs;
Other versions of this item:
- Ronald B. Davies & Helga Kristjánsdóttir, 2010. "Fixed Costs, Foreign Direct Investment, and Gravity with Zeros," Review of International Economics, Wiley Blackwell, vol. 18(1), pages 47-62, 02.
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Theo S Eicher & Lindy Helfman & Alex Lenkoski, 2011.
"Robust FDI Determinants: Bayesian Model Averaging In The Presence Of Selection Bias,"
UWEC-2011-07-FC, University of Washington, Department of Economics.
- Eicher, Theo S. & Helfman, Lindy & Lenkoski, Alex, 2012. "Robust FDI determinants: Bayesian Model Averaging in the presence of selection bias," Journal of Macroeconomics, Elsevier, vol. 34(3), pages 637-651.
- Boring, Anne, 2010. "Determinants of the United States’ trade of pharmaceuticals," Economics Papers from University Paris Dauphine 123456789/4340, Paris Dauphine University.
- Yuko Hashimoto & Konstantin Wacker, 2012.
"The Role of Risk and Information for International Capital Flows: New Evidence from the SDDS,"
IMF Working Papers
12/242, International Monetary Fund.
- Yuko Hashimoto & Konstantin M. Wacker, 2012. "The Role of Risk and Information for International Capital Flows: New Evidence from the SDDS," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 124, Courant Research Centre PEG.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bill Harbaugh).
If references are entirely missing, you can add them using this form.