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Infrastructure and the Location of Foreign Direct Investment A Regional Analysis

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  • Castro, Lucio

Abstract

In the 1990’s, Argentina became a top destination for FDI to developing countries. The geographical distribution of FDI inflows was, however, highly uneven. In parallel, the spatial allocation of public infrastructure greatly mirrored these regional disparities. What were the determinants of FDI location? What was the role of public infrastructure? This paper attempts to answer these questions using spatial econometric techniques for a panel of regional and FDI data of the Argentine provinces. Results suggest that space matters for FDI location, indicating some competition effects in FDI inflows between neighbouring provinces. Paved roads seem also matter but other proxies of infrastructure do not seem to be that important. According to our results, a 10% increase in paved roads per capita augments FDI between 17% and 33% in the average host regional economy. Extending the network of paved roads in neighbouring regions would increase FDI between 12% and 14% but results are not robust.

Suggested Citation

  • Castro, Lucio, 2007. "Infrastructure and the Location of Foreign Direct Investment A Regional Analysis," MPRA Paper 6736, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:6736
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    1. Carol Teresa Wekesa & Nelson H. Wawire & George Kosimbei, 2016. "Effects of Infrastructure Development on Foreign Direct Investment in Kenya," Journal of Infrastructure Development, India Development Foundation, vol. 8(2), pages 93-110, December.
    2. Shah, Mumtaz Hussain & Khan, Faisal, 2019. "Telecommunication Infrastructure Development and FDI into Asian Developing Nations," MPRA Paper 107255, University Library of Munich, Germany.
    3. Pavel V. POPOV & Marina V. LEDENEVA & Victoria V. BATMANOVA, 2021. "Influence Of Logistics Infrastructure Of Russian Federal Districts On Their Social And Economic Indicators," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 21(2), pages 29-40.
    4. Maria Florencia Granato, 2011. "REGIONAL NEW ECONOMIC GEOGRAPHY (refereed paper)," ERSA conference papers ersa10p747, European Regional Science Association.
    5. Arogundade, Sodiq & Biyase, Mduduzi & Eita, Joel H., 2021. "Foreign Direct Investment and Inclusive Human Development in Sub-Saharan African Countries: Domestic Conditions Matter," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 74(4), pages 463-498.
    6. Malek, Mohammad Abdul & Hossain, Md. Amzad & Saha, Ratnajit & Gatzweiler, Franz W., 2013. "Mapping marginality hotspots and agricultural potentials in Bangladesh," Working Papers 154065, University of Bonn, Center for Development Research (ZEF).

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    More about this item

    Keywords

    Foreign Direct Investment; Infrastructure; Spatial Econometrics; Economic Geography;
    All these keywords.

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics

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