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The Location Choices of Foreign Investors: A District-level Analysis in India

  • Megha Mukim
  • Peter Nunnenkamp

This paper analyzes the determinants of the location choices made by foreign investors at the district level in India to gauge the relative importance of economic geography factors, local business conditions, and the presence of previous foreign investors. We employ a discrete-choice model and Poisson regressions to control for the potential violation of the assumption of Independence of Irrelevant Alternatives. Our sample includes about 19,500 foreign investment projects approved in 447 districts from 1991-2005. We find that foreign investors strongly prefer locations where other foreign investors are. They are also attracted to industrially diverse locations and those with better infrastructure. We conclude that the concentration of FDI in a few locations could fuel regional divergence in post-reform India

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File URL: https://www.ifw-members.ifw-kiel.de/publications/the-location-choices-of-foreign-investors-a-district-level-analysis-in-india/kwp_1628.pdf
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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1628.

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Length: 38 pages
Date of creation: Jun 2010
Date of revision:
Handle: RePEc:kie:kieliw:1628
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  1. Nicolas Coeurdacier & Roberto A. De Santis & Antonin Aviat, 2009. "Cross-border mergers and acquisitions and European integration," Economic Policy, CEPR;CES;MSH, vol. 24, pages 55-106, 01.
  2. Mario Jametti & Marius Brülhart & Kurt Schmidheiny, 2007. "Do Agglomeration Economies Reduce the Sensitivity of Firm Location to Tax Differentials?," Working Papers 2007_9, York University, Department of Economics.
  3. Cletus C. Coughlin & Eran Segev, 1999. "Foreign direct investment in China: a spatial econometric study," Working Papers 1999-001, Federal Reserve Bank of St. Louis.
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