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US county-level determinants of inbound FDI: evidence from a two-step modified count data model

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  • John List

Abstract

We employ a two-step modified count data model to determine the county-level attributes that are conducive to attracting new foreign plants. Our estimation results indicate that previous counts of foreign direct investment, market size and accessibility, and land area are positively related to Foreign Direct Investment (FDI) occurrences; while higher input costs deter new foreign firm entry. Contrary to anecdotal evidence, our results suggest that stringent environmental regulations do not have a negative impact on FDI inflows. These findings have significant implications for policymakers, as flows of FDI are expected to increase dramatically given the economic integration of our global economy.

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  • John List, 2001. "US county-level determinants of inbound FDI: evidence from a two-step modified count data model," Natural Field Experiments 00515, The Field Experiments Website.
  • Handle: RePEc:feb:natura:00515
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    1. Henderson, J Vernon, 1996. "Effects of Air Quality Regulation," American Economic Review, American Economic Association, vol. 86(4), pages 789-813, September.
    2. Bruce A. Blonigen & Robert C. Feenstra, 1997. "Protectionist Threats and Foreign Direct Investment," NBER Chapters,in: The Effects of U.S. Trade Protection and Promotion Policies, pages 55-80 National Bureau of Economic Research, Inc.
    3. Papke, Leslie E., 1991. "Interstate business tax differentials and new firm location : Evidence from panel data," Journal of Public Economics, Elsevier, vol. 45(1), pages 47-68, June.
    4. Virginia D. McConnell & Robert M. Schwab, 1990. "The Impact of Environmental Regulation on Industry Location Decisions: The Motor Vehicle Industry," Land Economics, University of Wisconsin Press, vol. 66(1), pages 67-81.
    5. List, John A & Shogren, Jason F, 1998. "The Deadweight Loss of Christmas: Comment," American Economic Review, American Economic Association, vol. 88(5), pages 1350-1355, December.
    6. Coughlin, Cletus C & Terza, Joseph V & Arromdee, Vachira, 1991. "State Characteristics and the Location of Foreign Direct Investment within the United States," The Review of Economics and Statistics, MIT Press, vol. 73(4), pages 675-683, November.
    7. Adam B. Jaffe et al., 1995. "Environmental Regulation and the Competitiveness of U.S. Manufacturing: What Does the Evidence Tell Us?," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 132-163, March.
    8. Vuong, Quang H, 1989. "Likelihood Ratio Tests for Model Selection and Non-nested Hypotheses," Econometrica, Econometric Society, vol. 57(2), pages 307-333, March.
    9. Levinson, Arik, 1996. "Environmental regulations and manufacturers' location choices: Evidence from the Census of Manufactures," Journal of Public Economics, Elsevier, vol. 62(1-2), pages 5-29, October.
    10. Robert Tannenwald, 1997. "State regulatory policy and economic development," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 83-108.
    11. John A. List & Mitch Kunce, 2000. "Environmental Protection and Economic Growth: What Do the Residuals Tell Us?," Land Economics, University of Wisconsin Press, vol. 76(2), pages 267-282.
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