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

  • Megha Mukim
  • Peter Nunnenkamp

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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File URL: http://hdl.handle.net/10.1111/j.1467-9701.2011.01393.x
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Article provided by Wiley Blackwell in its journal The World Economy.

Volume (Year): 35 (2012)
Issue (Month): 7 (07)
Pages: 886-918

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Handle: RePEc:bla:worlde:v:35:y:2012:i:7:p:886-918
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  1. Brülhart, Marius & Jametti, Mario & Schmidheiny, Kurt, 2007. "Do Agglomeration Economies Reduce the Sensitivity of Firm Location to Tax Differentials?," CEPR Discussion Papers 6606, C.E.P.R. Discussion Papers.
  2. 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.
  3. Cletus C. Coughlin & Eran Segev, 2000. "Foreign Direct Investment in China: A Spatial Econometric Study," The World Economy, Wiley Blackwell, vol. 23(1), pages 1-23, 01.
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