Similarity in Demand Structures and Foreign Direct Investment in the Food and Beverage Industry
I study the relationship between demand similarity and foreign direct investment in the food and beverage industry. My regression specification includes a measure of similarity in income per capita to proxy for similarity in demand. Using firm-level greenfield investment data, I find a significant effect of income similarity along the intensive and extensive margin of foreign direct investment. My findings show that investment activities are more intense between countries with similar income per capita. The similarity effect is larger for the intensive margin, implying that it is not only more likely that an investment is realized between countries with similar income per capita, but also that such a project involves a considerable larger investment and creates more jobs. Although I find evidence for heterogeneity in the similarity effect, all coefficient estimates have a negative sign. Moreover, distinguishing between types of foreign direct investment, I find that the similarity effect is mainly relevant for manufacturing projects. These results show that demand for quality is an important determinant of cross-border investment activities in the food and beverage industry.
|Date of creation:||May 2016|
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- Stein, Ernesto & Daude, Christian, 2007. "Longitude matters: Time zones and the location of foreign direct investment," Journal of International Economics, Elsevier, vol. 71(1), pages 96-112, March.
- Cheptea, Angela & Emlinger, Charlotte & Latouche, Karine, 2012.
"Multinational Retailers and Home Country Exports,"
2012: New Rules of Trade?, December 2012, San Diego, California
142777, International Agricultural Trade Research Consortium.
- Angela Cheptea & Charlotte Emlinger & Karine Latouche, 2013. "Multinational retailers and home country exports," Working Papers hal-01208857, HAL.
- Angela Cheptea & Charlotte Emlinger & Karine Latouche, 2012. "Multinational Retailers and Home Country Exports," Working Papers 2012-34, CEPII research center.
- Angela Cheptea & Charlotte Emlinger & Karine Latouche, 2012. "Multinational Retailers and Home Country Exports," Post-Print hal-01208840, HAL.
- Angela Cheptea & Charlotte Emlinger & Karine Latouche, 2013. "Multinational Retailers and Home Country Exports," Working Papers SMART - LERECO 13-03, INRA UMR SMART-LERECO.
- Colen, Liesbeth & Persyn, Damiaan & Guariso, Andrea, 2016. "Bilateral Investment Treaties and FDI: Does the Sector Matter?," World Development, Elsevier, vol. 83(C), pages 193-206.
- Angela Cheptea & Charlotte Emlinger & Karine Latouche, 2015. "Multinational Retailers and Home Country Food Exports," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 97(1), pages 159-179.
- Munisamy Gopinath & Rodrigo Echeverria, 2004. "Does Economic Development Impact the Foreign Direct Investment-Trade Relationship? A Gravity-Model Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(3), pages 782-787. Full references (including those not matched with items on IDEAS)
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