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The impact of regional investment liberalization on foreign direct investment: A firm-level simulation assessment

Listed author(s):
  • Tanaka, Kiyoyasu
  • Arita, Shawn

With the proliferation of regional economic integration, investment liberalization has gained in importance. This paper conducts counterfactual policy experiments to simulate the response of multinational firms to a regional decline in investment costs. We find evidence of investment creation effects at the aggregate level. While there is weak evidence of investment diversion effects, the non-participation in regional integration discourages multinational activity of non-member countries. As less productive firms experience the extensive-margin growth strongly, the effects differ significantly by multinational firms with heterogeneous productivity.

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File URL: http://www.sciencedirect.com/science/article/pii/S0922142516000025
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Article provided by Elsevier in its journal Japan and the World Economy.

Volume (Year): 37-38 (2016)
Issue (Month): ()
Pages: 17-26

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Handle: RePEc:eee:japwor:v:37-38:y:2016:i::p:17-26
DOI: 10.1016/j.japwor.2016.02.001
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505557

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