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Determinants of foreign direct investment in services

  • Ivar Kolstad
  • Espen Villanger

This study uses industry level foreign direct investment (FDI) data from 57 countries 1989-2000, to examine the host country determinants of FDI flows in services as a whole, and in the major service industries. Consistent with the observation that many services are non-tradable, we find that service FDI is market-seeking, and unaffected by trade openness. Producer services are important in binding together vertically disintegrated chains of production, accordingly we find a strong correlation between FDI in manufacturing and FDI in finance and transport. While composite political risk does not affect FDI in services, disaggregate socio-political indices prove significant in certain service industries.

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Paper provided by CMI (Chr. Michelsen Institute), Bergen, Norway in its series CMI Working Papers with number WP 2004: 2.

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Length: 25 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:chm:wpaper:wp2004-2
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