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Determinants of FDI for Spanish regions: Evidence using stock data

Author

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  • Mariam Camarero

    (Jaume I University. Department of Economics, Av. de Vicent Sos Baynat s/n, E-12071 Castellón, Spain)

  • Laura Montolio

    (University of Valencia, Department of Applied Economics II, Av. dels Tarongers, s/n Eastern Department Building E-46022 Valencia, Spain)

  • Cecilio Tamarit

    (University of Valencia, INTECO Joint Research Unit. Department of Applied Economics II. PO Box 22.006 - E-46071 Valencia, Spain)

Abstract

After two decades of academic debate on the factors that determine FDI, the discussion still remains open. This article empirically investigates the determinants of FDI activity from a macroeconomic point of view, using Spanish regional data (NUTS 2) for the period 2004-2013. We apply the Poisson Pseudo-Maximum-Likelihood estimator with country-origin fixed effects in a gravity framework. The empirical analysis revealed the following allocation patterns: FDI locational strategies in the Spanish regions are determined significantly by the economic potential and competitiveness of the regions and, in a lesser extent, by the productive capacity. We also confirm the adequacy of using the stock of FDI and obtain an improved specification of the model compared to previous empirical literature based on FDI flows. The results allow us to draw some policy implications about the prospective promotion of incoming FDI at the subnational level.

Suggested Citation

  • Mariam Camarero & Laura Montolio & Cecilio Tamarit, 2018. "Determinants of FDI for Spanish regions: Evidence using stock data," Working Papers 1809, Department of Applied Economics II, Universidad de Valencia.
  • Handle: RePEc:eec:wpaper:1809
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    More about this item

    Keywords

    Foreign Direct Investment determinants; PPML; Gravity model; Spanish regions;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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