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Infrastructure and the Location of Foreign Direct Investment A Regional Analysis

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Castro, Lucio

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Abstract

In the 1990’s, Argentina became a top destination for FDI to developing countries. The geographical distribution of FDI inflows was, however, highly uneven. In parallel, the spatial allocation of public infrastructure greatly mirrored these regional disparities. What were the determinants of FDI location? What was the role of public infrastructure? This paper attempts to answer these questions using spatial econometric techniques for a panel of regional and FDI data of the Argentine provinces. Results suggest that space matters for FDI location, indicating some competition effects in FDI inflows between neighbouring provinces. Paved roads seem also matter but other proxies of infrastructure do not seem to be that important. According to our results, a 10% increase in paved roads per capita augments FDI between 17% and 33% in the average host regional economy. Extending the network of paved roads in neighbouring regions would increase FDI between 12% and 14% but results are not robust.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 6736.

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Date of creation: Nov 2007
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Handle: RePEc:pra:mprapa:6736

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Related research
Keywords: Foreign Direct Investment Infrastructure Spatial Econometrics Economic Geography

Find related papers by JEL classification:
H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
C01 - Mathematical and Quantitative Methods - - General - - - Econometrics

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References listed on IDEAS
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. Kelejian, Harry H & Prucha, Ingmar R, 1999. "A Generalized Moments Estimator for the Autoregressive Parameter in a Spatial Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(2), pages 509-33, May.
  2. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Blackwell Publishing, vol. 58(2), pages 277-97, April. [Downloadable!] (restricted)
  3. Bruce A. Blonigen, 2005. "A Review of the Empirical Literature on FDI Determinants," NBER Working Papers 11299, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Head, Keith & Ries, John & Swenson, Deborah, 1995. "Agglomeration benefits and location choice: Evidence from Japanese manufacturing investments in the United States," Journal of International Economics, Elsevier, vol. 38(3-4), pages 223-247, May. [Downloadable!] (restricted)
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  5. Bruce Blonigen, 2005. "A Review of the Empirical Literature on FDI Determinants," Atlantic Economic Journal, International Atlantic Economic Society, vol. 33(4), pages 383-403, December. [Downloadable!] (restricted)
  6. Cheng, Leonard K. & Kwan, Yum K., 2000. "What are the determinants of the location of foreign direct investment? The Chinese experience," Journal of International Economics, Elsevier, vol. 51(2), pages 379-400, August. [Downloadable!] (restricted)
  7. Keith Head & Thierry Mayer, 2004. "Market Potential and the Location of Japanese Investment in the European Union," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 959-972, 01. [Downloadable!] (restricted)
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  8. Maria Abreu & Henri L.F. de Groot & Raymond J.G.M. Florax, 2004. "Space and Growth," Tinbergen Institute Discussion Papers 04-129/3, Tinbergen Institute. [Downloadable!]
  9. Dollar, David & Hallward-Driemeier, Mary & Mengistae, Taye, 2004. "Investment climate and international integration," Policy Research Working Paper Series 3323, The World Bank. [Downloadable!]
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  10. Cletus C. Coughlin & Eran Segev, 1999. "Foreign direct investment in China: a spatial econometric study," Working Papers 1999-001, Federal Reserve Bank of St. Louis. [Downloadable!]
    Other versions:
  11. Steve Bond, 2002. "Dynamic panel data models: a guide to microdata methods and practice," CeMMAP working papers CWP09/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies. [Downloadable!]
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