IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Do Natural Resources Attract FDI? Evidence from Non-Stationary Sector-Level Data

  • Poelhekke, Steven
  • van der Ploeg, Frederick

A new and extensive panel of outward foreign direct investment (FDI) at the sector level is used to estimate the determinants of non-resource and resource FDI. Since FDI is I(1), we estimate panel error-correction models of FDI with spatial lags for FDI and market potential. Our main result is that subsoil assets boost resource FDI, but crowd out non-resource FDI. The effect on non-resource FDI dominates, so that aggregate FDI is less in resource-rich countries. Spatial lags aggravate this crowding out of non-resource FDI. In addition, we find that (i) resource FDI is mainly vertical whereas other FDI is of the export-fragmentation variety; (ii) trade openness, free trade agreements and institutional quality do not impact non-resource FDI but institutional quality does have a positive effect on resource FDI; and (iii) the short-run dynamics comes mostly from shocks to FDI itself. Our main and ancillary results are robust to different measures of resource reserves and the oil price and to allowing for sample selection bias.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=8079
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8079.

as
in new window

Length:
Date of creation: Oct 2010
Date of revision:
Handle: RePEc:cpr:ceprdp:8079
Contact details of provider: Postal:
Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.

Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information: Email:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Neary, Peter, 1988. "Determinants of the Equilibrium Real Exchange Rate," American Economic Review, American Economic Association, vol. 78(1), pages 210-15, March.
  2. Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 451-71, June.
  3. Christa N. Brunnschweiler & Erwin H. Bulte, 2009. "Natural resources and violent conflict: resource abundance, dependence, and the onset of civil wars," Oxford Economic Papers, Oxford University Press, vol. 61(4), pages 651-674, October.
  4. Wacziarg, Romain & Welch, Karen Horn, 2003. "Trade Liberalization and Growth: New Evidence," Research Papers 1826, Stanford University, Graduate School of Business.
  5. Karolina Ekholm & Rikard Forslid & James Markusen, 2003. "Export-Platform Foreign Direct Investment," NBER Working Papers 9517, National Bureau of Economic Research, Inc.
  6. Robert J. Barro & Jong-Wha Lee, 2000. "International Data on Educational Attainment: Updates and Implications," CID Working Papers 42, Center for International Development at Harvard University.
  7. Maggie Xiaoyang Chen & Michael Owen Moore, 2009. "Location Decisions of Heterogeneous Multinational Firms," Working Papers 2009-17, The George Washington University, Institute for International Economic Policy.
  8. James E. Anderson & Eric van Wincoop, 2001. "Gravity with Gravitas: A Solution to the Border Puzzle," NBER Working Papers 8079, National Bureau of Economic Research, Inc.
  9. Frederick Van der Ploeg & Steven Poelhekke, 2010. "The Pungent Smell of "Red Herrings": Subsoil Assets, Rents, Volatility and the Resource Curse," CESifo Working Paper Series 3013, CESifo Group Munich.
  10. Joao Santos Silva & Silvana Tenreyro, 2005. "The Log of Gravity," CEP Discussion Papers dp0701, Centre for Economic Performance, LSE.
  11. Markusen, James R., 1984. "Multinationals, multi-plant economies, and the gains from trade," Journal of International Economics, Elsevier, vol. 16(3-4), pages 205-226, May.
  12. Raymond J.G.M. Florax & Hendrik Folmer & Sergio J. Rey, 2002. "Specification Searches in Spatial Econometrics: The Relevance of Hendry's Methodology," Urban/Regional 0202001, EconWPA.
  13. Badi H. Baltagi & Georges Bresson & Alain Pirotte, 2006. "Panel Unit Root Tests and Spatial Dependence," Center for Policy Research Working Papers 88, Center for Policy Research, Maxwell School, Syracuse University.
  14. Halvor Mehlum & Karl Moene & Ragnar Torvik, 2002. "Institutions and the resource curse," Development and Comp Systems 0210003, EconWPA.
  15. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2007. "Estimating Trade Flows: Trading Partners and Trading Volumes," NBER Working Papers 12927, National Bureau of Economic Research, Inc.
  16. Chihwa Kao & Min-Hsien Chiang, 1999. "On the Estimation and Inference of a Cointegrated Regression in Panel Data," Center for Policy Research Working Papers 2, Center for Policy Research, Maxwell School, Syracuse University.
  17. Baltagi, Badi H. & Egger, Peter & Pfaffermayr, Michael, 2007. "Estimating models of complex FDI: Are there third-country effects?," Journal of Econometrics, Elsevier, vol. 140(1), pages 260-281, September.
  18. Benedikt Goderis & Samuel W. Malone, 2008. "Natural Resource Boom and Inequality: Theory and Evidence," CSAE Working Paper Series 2008-11, Centre for the Study of African Economies, University of Oxford.
  19. Oeindrila Dube & Juan F. Vargas, 2006. "Are All Resources Cursed? Coffee, Oil and Armed Confict in Colombia," DOCUMENTOS DE CERAC 002024, CERAC -CENTRO DE RECURSOS PARA EL ANÁLISIS DE CONFLICTOS-.
  20. Frederick van der Ploeg & Steven Poelhekke, 2009. "Volatility and the natural resource curse," Oxford Economic Papers, Oxford University Press, vol. 61(4), pages 727-760, October.
  21. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
  22. Peter C. B. Phillips & Hyungsik R. Moon, 1999. "Linear Regression Limit Theory for Nonstationary Panel Data," Econometrica, Econometric Society, vol. 67(5), pages 1057-1112, September.
  23. Frederick Van der Ploeg, 2010. "Natural Resources: Curse or Blessing?," CESifo Working Paper Series 3125, CESifo Group Munich.
  24. Blonigen, Bruce A. & Davies, Ronald B. & Waddell, Glen R. & Naughton, Helen T., 2007. "FDI in space: Spatial autoregressive relationships in foreign direct investment," European Economic Review, Elsevier, vol. 51(5), pages 1303-1325, July.
  25. Shang-Jin Wei, 1997. "How Taxing is Corruption on International Investors?," William Davidson Institute Working Papers Series 63, William Davidson Institute at the University of Michigan.
  26. Art Durnev & Sergei Guriev, 2007. "The Resource Curse: A Corporate Transparency Channel," Working Papers w0108, Center for Economic and Financial Research (CEFIR).
  27. David L. Carr & James R. Markusen & Keith E. Maskus, 1998. "Estimating the Knowledge-Capital Model of the Multinational Enterprise," NBER Working Papers 6773, National Bureau of Economic Research, Inc.
  28. Nelson C. Mark & Donggyu Sul, 2002. "Cointegration Vector Estimation by Panel DOLS and Long-Run Money Demand," NBER Technical Working Papers 0287, National Bureau of Economic Research, Inc.
  29. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  30. Wheeler, David & Mody, Ashoka, 1992. "International investment location decisions : The case of U.S. firms," Journal of International Economics, Elsevier, vol. 33(1-2), pages 57-76, August.
  31. Kelejian, Harry H & Prucha, Ingmar R, 1999. "A Generalized Moments Estimator for the Autoregressive Parameter in a Spatial Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(2), pages 509-33, May.
  32. Boschini, Anne & Pettersson, Jan & Roine, Jesper, 2003. "Resource curse or not: A question of appropriability," SSE/EFI Working Paper Series in Economics and Finance 534, Stockholm School of Economics.
  33. G�ran Therborn & K.C. Ho, 2009. "Introduction," City, Taylor & Francis Journals, vol. 13(1), pages 53-62, March.
  34. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
  35. James R. Markusen, 2004. "Multinational Firms and the Theory of International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633078, June.
  36. Pesaran, M.H., 2003. "A Simple Panel Unit Root Test in the Presence of Cross Section Dependence," Cambridge Working Papers in Economics 0346, Faculty of Economics, University of Cambridge.
  37. Markusen, James R & Maskus, Keith E, 2002. "Discriminating among Alternative Theories of the Multinational Enterprise," Review of International Economics, Wiley Blackwell, vol. 10(4), pages 694-707, November.
  38. Mutti, John & Grubert, Harry, 2004. "Empirical asymmetries in foreign direct investment and taxation," Journal of International Economics, Elsevier, vol. 62(2), pages 337-358, March.
  39. Martin Wagner & Jaroslava Hlouskova, 2010. "The Performance of Panel Cointegration Methods: Results from a Large Scale Simulation Study," Econometric Reviews, Taylor & Francis Journals, vol. 29(2), pages 182-223, April.
  40. Baier, Scott L. & Bergstrand, Jeffrey H., 2007. "Do free trade agreements actually increase members' international trade?," Journal of International Economics, Elsevier, vol. 71(1), pages 72-95, March.
  41. Steven Poelhekke & Frederick van der Ploeg, 2009. "Foreign Direct Investment And Urban Concentrations: Unbundling Spatial Lags," Journal of Regional Science, Wiley Blackwell, vol. 49(4), pages 749-775.
  42. J. Barkley Rosser, 2009. "Introduction," Chapters, in: Handbook of Research on Complexity, chapter 1 Edward Elgar.
  43. Head, Keith & Ries, John, 2008. "FDI as an outcome of the market for corporate control: Theory and evidence," Journal of International Economics, Elsevier, vol. 74(1), pages 2-20, January.
  44. Christa N. Brunnschweiler & Erwin H. Bulte, 2006. "The Resource Curse Revisited and Revised: A Tale of Paradoxes and Red Herrings," CER-ETH Economics working paper series 06/61, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  45. Collier, Paul & Hoeffler, Anke, 1998. "On Economic Causes of Civil War," Oxford Economic Papers, Oxford University Press, vol. 50(4), pages 563-73, October.
  46. Kenneth A. Froot & Jeremy C. Stein, 1991. "Exchange Rates and Foreign Direct Investment: An Imperfect Capital Markets Approach," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 1191-1217.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:8079. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

The email address of this maintainer does not seem to be valid anymore. Please ask to update the entry or send us the correct email address

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.