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Spacey Parents: Spatial Autoregressive Patterns in Inbound FDI

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  • Bruce A. Blonigen
  • Ronald B. Davies
  • Helen T. Naughton
  • Glen R. Waddell

Abstract

Increasing attention has been given to the impact of third countries on outbound FDI to a given host country. Here, we consider potential third-country effects on inbound FDI. A simple model suggests two sources of such effects on a country's inbound FDI. First, it will tend to receive more FDI fromparent countries proximate to large third countries. Second, FDI from third countries may increase or decrease FDI from the parent country in question depending on whether production spillovers or crowding out effects dominate. Using data on US inbound FDI from OECD countries during 1980-2000, we find strong evidence for parent market proximity effects. We find robust results for third country FDI effects only in a European subsample. There, crowding out effects dominate.

Suggested Citation

  • Bruce A. Blonigen & Ronald B. Davies & Helen T. Naughton & Glen R. Waddell, 2005. "Spacey Parents: Spatial Autoregressive Patterns in Inbound FDI," NBER Working Papers 11466, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:11466
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    Cited by:

    1. Kristian Behrens & Cem Ertur & Wilfried Koch, 2012. "‘Dual’ Gravity: Using Spatial Econometrics To Control For Multilateral Resistance," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 27(5), pages 773-794, August.
    2. Ronald B. Davies & Johannes Voget, 2008. "Tax competition in an expanding European Union," Working Papers 200904, School of Economics, University College Dublin.
    3. Harry Garretsen & Jolanda Peeters, 2009. "FDI and the relevance of spatial linkages: do third-country effects matter for Dutch FDI?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 145(2), pages 319-338, July.
    4. Baltagi, Badi H. & Egger, Peter & Pfaffermayr, Michael, 2008. "Estimating regional trade agreement effects on FDI in an interdependent world," Journal of Econometrics, Elsevier, vol. 145(1-2), pages 194-208, July.
    5. Peter Egger & Simon Loretz & Michael Pfaffermayr & Hannes Winner, 2006. "Corporate Taxation and Multinational Activity," CESifo Working Paper Series 1773, CESifo Group Munich.
    6. José-Antonio Monteiro & Madina Kukenova, 2008. "Does Lax Environmental Regulation Attract FDI When Accounting For "Third-Country" Effects?," IRENE Working Papers 08-01, IRENE Institute of Economic Research.
    7. Helen Tammela Naughton, 2010. "Globalization and Emissions in Europe," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 7(2), pages 503-519, December.
    8. Millimet, Daniel L. & Roy, Jayjit, 2011. "Three New Empirical Tests of the Pollution Haven Hypothesis When Environmental Regulation is Endogenous," IZA Discussion Papers 5911, Institute for the Study of Labor (IZA).
    9. Kukenova, Madina & Monteiro, Jose-Antonio, 2008. "Spatial Dynamic Panel Model and System GMM: A Monte Carlo Investigation," MPRA Paper 11569, University Library of Munich, Germany, revised Nov 2008.
    10. Chou, Kuang-Hann & Chen, Chien-Hsun & Mai, Chao-Cheng, 2011. "The impact of third-country effects and economic integration on China's outward FDI," Economic Modelling, Elsevier, vol. 28(5), pages 2154-2163, September.
    11. Blonigen, Bruce A. & Davies, Ronald B. & Waddell, Glen R. & Naughton, Helen T., 2007. "FDI in space: Spatial autoregressive relationships in foreign direct investment," European Economic Review, Elsevier, vol. 51(5), pages 1303-1325, July.

    More about this item

    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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