Effects of regional integration on FDI: An empirical approach
This study uses an augmented gravity model to capture the effect of regional economic integration on Foreign Direct Investment (FDI) flows in the cases of the EU, NAFTA, MERCOSUR, and ASEAN. Three important conclusions emerge: (i) regional integration has had a positive and significant effect on FDI, which is a combination of investment creation and diversion; (ii) investment diversion does occur in a significant number of cases, and hence it is a legitimate cause for concern, especially among developing countries that are not part of a regional grouping with at least one developed country; and (iii) FDI acts as a substitute for trade in a significant number of cases, although in some cases, it complements trade.
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- Blomström, Magnus & Kokko, Ari, 1997.
"Regional Integration and Foreign Direct Investment,"
CEPR Discussion Papers
1659, C.E.P.R. Discussion Papers.
- Blomström, Magnus & Kokko, Ari, 1997. "Regional Integration and Foreign Direct Investment," SSE/EFI Working Paper Series in Economics and Finance 172, Stockholm School of Economics.
- Magnus Blomstrom & Ari Kokko, 1997. "Regional Integration and Foreign Direct Investment," NBER Working Papers 6019, National Bureau of Economic Research, Inc.
- Baldwin, Richard & Seghezza, Elena, 1996. "Trade-induced Investment-led Growth," CEPR Discussion Papers 1420, C.E.P.R. Discussion Papers.
- Richard E. Baldwin & Elena Seghezza, 1996. "Trade-Induced Investment-led Growth," NBER Working Papers 5582, National Bureau of Economic Research, Inc.
- Caroline L. Freund & John McLaren, 1999. "On the dynamics of trade diversion: evidence from four trade blocs," International Finance Discussion Papers 637, Board of Governors of the Federal Reserve System (U.S.).
- John H. Dunning & Peter Robson, 1987. "Multinational Corporate Integration and Regional Economic Integration," Journal of Common Market Studies, Wiley Blackwell, vol. 26(2), pages 103-125, December.
- Seghezza, Elena & Baldwin, Richard E., 2008. "Testing for Trade-Induced Investment-Led Growth," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 61(2-3), pages 507-537.
- Baldwin, Richard & Seghezza, Elena, 1996. "Testing for Trade-induced Investment-led Growth," CEPR Discussion Papers 1331, C.E.P.R. Discussion Papers.
- Richard E. Baldwin & Elena Seghezza, 1996. "Testing for Trade-Induced Investment-Led Growth," NBER Working Papers 5416, National Bureau of Economic Research, Inc.
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