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Do Regional Trade Agreements Increase Bilateral Greenfield Investment?

Author

Listed:
  • Chala, Badassa Wolteji

    (Kangwon National University)

  • Lee, Hyun-Hoon

    (Kangwon National University)

Abstract

Using bilateral flow data among 25 Organizations for Economic Co-operation and Development and 45 high-income and 95 non-high income countries spanning 2003~2012, we empirically investigate how bilateral greenfield investment responds to common membership in Regional Trade Agreements. Unlike the Regional Trade Agreement-trade nexus, there have been very few studies that investigate the effects of Regional Trade Agreements on bilateral Foreign Direct Investment flows. Our chosen model specifications include Poisson Pseudo-Maximum-Likelihood estimator with bilateral and country-time fixed effects. We find that common membership in Regional Trade Agreements discourages greenfield investment in Organization for Economic Co-operation and Development-high income country pairs whereas they promote nonhigh income country pairs. We also find that lead and lagged Regional Trade Agreement common membership discourages greenfield investment in Organization for Economic Co-operation and Development-high-income pairs while it encourages non-high-income country pairs.

Suggested Citation

  • Chala, Badassa Wolteji & Lee, Hyun-Hoon, 2015. "Do Regional Trade Agreements Increase Bilateral Greenfield Investment?," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 30(4), pages 680-707.
    • Handle: RePEc:ris:integr:0673
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    Citations

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    Cited by:

    1. Anirudh Shingal & Maximiliano Mendez-Parra, 2020. "African greenfield investment and the likely effect of the African Continental Free Trade Area," Indian Council for Research on International Economic Relations (ICRIER) Working Paper 387, Indian Council for Research on International Economic Relations (ICRIER), New Delhi, India.
    2. Yamlaksira S. Getachew & Roger Fon & Elie Chrysostome, 2023. "On the location choices of African multinational enterprises: Do supranational economic institutions matter?," Journal of International Business Policy, Palgrave Macmillan, vol. 6(4), pages 453-490, December.

    More about this item

    Keywords

    Bilateral Greenfield Investment; Regional Trade Agreements; Endogeneity; Gravity;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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