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Do Neighbors of Host Countries Matter to Aggregate US FDI Outflows?

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  • Francis M. Kemegue

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    (Department of Economics, University of Pretoria)

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    Abstract

    Modeling spatial interaction among contiguous host countries receiving foreign di- rect investment from the same source country is usually conceived as reflection of market seeking behaviors or cost saving strategies of firms executing location arbitrage. This paper approaches the contiguity in aggregate data from the same source country as an incentive driven process where stocks attract new flows in the neigh- borhood of the stock location. We examine the influence of geographic neighbors on new flows of FDI from the United States in 3 different clusters in the world. The results show that host country's neighbors matter to new flows of FDI, however, they also indicate that, across clusters, cross countries spillovers are associated with non- manufacturing FDI (investments in services) but not with manufacturing FDI.

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    File URL: http://web.up.ac.za/sitefiles/file/40/677/WP_2009_29.pdf
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    Bibliographic Info

    Paper provided by University of Pretoria, Department of Economics in its series Working Papers with number 200929.

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    Length: 31 pages
    Date of creation: Dec 2009
    Date of revision:
    Handle: RePEc:pre:wpaper:200929

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    Related research

    Keywords: Foreign direct investment; Spillovers; Spatial autocorrelation;

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    1. Weinhold, Diana, 2002. "The Importance of Trade and Geography in the Pattern of Spatial Dependence of Growth Rates," Review of Development Economics, Wiley Blackwell, vol. 6(3), pages 369-82, October.
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    13. Conley, Timothy G & Ligon, Ethan, 2002. " Economic Distance and Cross-Country Spillovers," Journal of Economic Growth, Springer, vol. 7(2), pages 157-87, June.
    14. Barrell, Ray & Pain, Nigel, 1996. "An Econometric Analysis of U.S. Foreign Direct Investment," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 200-207, May.
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