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Determinants of Foreign Direct Investment in Iceland

Author

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  • Helga Kristjánsdóttir

    (University of Iceland)

Abstract

This paper investigates whether the low foreign direct investment in Iceland can be explained by its geographical location together with market size measures. The effects of these factors on inward FDI are analyzed by means of the gravity model. The model is also applied to analyze sector, trade bloc and country specific effects. The research is based on panel data, running over countries, sectors and years. Results indicate that distance negatively affects FDI and that FDI appears to be more driven by wealth effects than market size effects.

Suggested Citation

  • Helga Kristjánsdóttir, 2005. "Determinants of Foreign Direct Investment in Iceland," CAM Working Papers 2005-15, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
  • Handle: RePEc:kud:kuieca:2005_15
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    File URL: http://www.econ.ku.dk/cam/wp0910/wp0406/2005-15.pdf/
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    References listed on IDEAS

    as
    1. Blomstrom, Magnus & Fors, Gunnar & Lipsey, Robert E, 1997. "Foreign Direct Investment and Employment: Home Country Experience in the United States and Sweden," Economic Journal, Royal Economic Society, vol. 107(445), pages 1787-1797, November.
    2. Felipa De Mello-Sampayo, 2007. "The Location of the United States' FDI Under the Share Gravity Model," International Economic Journal, Taylor & Francis Journals, vol. 21(4), pages 491-519.
    3. International Monetary Fund, 1992. "Regional Trade Arrangements," IMF Occasional Papers 93, International Monetary Fund.
    4. Magnus Blomstrom & Robert E. Lipsey & Ksenia Kulchycky, 1988. "U.S. and Swedish Direct Investment and Exports," NBER Chapters,in: Trade Policy Issues and Empirical Analysis, pages 257-302 National Bureau of Economic Research, Inc.
    5. Blomström, Magnus & Kokko, Ari, 1995. "Foreign Direct Investment and Politics: The Swedish Model," SSE/EFI Working Paper Series in Economics and Finance 66, Stockholm School of Economics.
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    Cited by:

    1. Belkacem Laabas and Walid Abdmoulah, "undated". "Determinants of Arab Intraregional Foreign Direct Investments," API-Working Paper Series 0905, Arab Planning Institute - Kuwait, Information Center.

    More about this item

    Keywords

    foreign direct investment; gravity model;

    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

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