IDEAS home Printed from https://ideas.repec.org/p/ecb/ecbwps/20263245.html

FDI, gravity, and aggregation: revisiting the distance elasticity with sector-level FDI data

Author

Listed:
  • Wacker, Konstantin M.
  • Rebmann, Nicola

Abstract

This paper re-examines foreign direct investment motives in the ‘FDI gravity’ model (Kleinert and Toubal, 2010), focusing on the role of distance. More precisely, we investigate whether aggregate and pooled gravity models for FDI obscure relevant heterogeneities across sectors. This is possible through the novel MREID dataset, which provides us with FDI data at the 2-digit NAICS level for 184 countries over the period 2010 to 2020. Our results reveal that aggregate and pooled models mask significant sector heterogeneities in two aspects: (i) in the importance of horizontal versus vertical FDI motives, and (ii) in the distance elasticity. Distance is negatively correlated with FDI on an aggregate level, which is robust to multiple econometric specifications, but exhibits significant sector heterogeneity. Our analysis suggests the presence of complex sector-specific components that cannot easily be explained with standard economic rationales. JEL Classification: F21, F23, C33

Suggested Citation

  • Wacker, Konstantin M. & Rebmann, Nicola, 2026. "FDI, gravity, and aggregation: revisiting the distance elasticity with sector-level FDI data," Working Paper Series 3245, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20263245
    as

    Download full text from publisher

    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp3245~4d5ee7e8ea.en.pdf
    Download Restriction: no
    ---><---

    More about this item

    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
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecb:ecbwps:20263245. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Official Publications (email available below). General contact details of provider: https://edirc.repec.org/data/emieude.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.