IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Do determinants of FDI to developing countries differ among OECD investors? Insights from Bayesian model averaging

  • Antonakakis, Nikolaos
  • Tondl, Gabriele

The main objective of this paper is to examine the determining factors of outward FDI from four major OECD investors US, Germany, France and the Netherlands to developing countries located in different world regions. Our goal is to elucidate whether the motivation for FDI differs among these investors. Rather than relying on specific theories of FDI determinants we examine them all simultaneously employing Bayesian Model Averaging (BMA) in a panel data set with 129 FDI destinations in 5 geographical regions over the period 1995-2008. This approach permits us to select the most appropriate model that governs FDI allocation and to distinguish robust FDI determinants. We find that all our investors search for destinations with whom they have established intensive trade relations and that offer a qualified labor force. However, low wages and attractive tax rates are robust investment criteria too, and a considerable share of FDI is still resource-driven. Our investors show fairly similar strategies in the main FDI destinations.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Europa-Kolleg Hamburg, Institute for European Integration in its series Discussion Papers with number 1/12.

in new window

Date of creation: 2012
Date of revision:
Handle: RePEc:zbw:ekhdps:112
Contact details of provider: Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Thiess Buettner & Martin Ruf, 2007. "Tax incentives and the location of FDI: Evidence from a panel of German multinationals," International Tax and Public Finance, Springer, vol. 14(2), pages 151-164, April.
  2. 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.
  3. Kim, Young-Han, 2007. "Impacts of regional economic integration on industrial relocation through FDI in East Asia," Journal of Policy Modeling, Elsevier, vol. 29(1), pages 165-180.
  4. Khalid Sekkat & Marie-Ange Veganzones-Varoudakis, 2007. "Openness, Investment Climate, and FDI in Developing Countries," Review of Development Economics, Wiley Blackwell, vol. 11(4), pages 607-620, November.
  5. Bruce A. Blonigen, 2005. "A Review of the Empirical Literature on FDI Determinants," NBER Working Papers 11299, National Bureau of Economic Research, Inc.
  6. Fragkiskos Filippaios & Marina Papanastassiou, 2008. "US Outward Foreign Direct Investment in the European Union and the Implementation of the Single Market: Empirical Evidence from a Cohesive Framework," Journal of Common Market Studies, Wiley Blackwell, vol. 46, pages 969-1000, December.
  7. Fernandez, Carmen & Ley, Eduardo & Steel, Mark F. J., 2001. "Benchmark priors for Bayesian model averaging," Journal of Econometrics, Elsevier, vol. 100(2), pages 381-427, February.
  8. Prüfer, P. & Tondl, G., 2008. "The FDI-Growth Nexus in Latin America : The Role of Source Countries and Local Conditions," Discussion Paper 2008-61, Tilburg University, Center for Economic Research.
  9. Melanie Lansbury & Nigel Pain & Katerina Smidkova, 1996. "Foreign Direct Investment in Central Europe Since 1990: An Econometric Study," National Institute Economic Review, National Institute of Economic and Social Research, vol. 156(1), pages 104-114, May.
  10. de Boyrie Maria E, 2010. "Structural Changes, Causality, and Foreign Direct Investments: Evidence from the Asian Crises of 1997," Global Economy Journal, De Gruyter, vol. 9(4), pages 1-40, January.
  11. Bevan, Alan & Estrin, Saul & Meyer, Klaus, 2004. "Foreign investment location and institutional development in transition economies," International Business Review, Elsevier, vol. 13(1), pages 43-64, February.
  12. Antal-Mokos,Zoltan, 1998. "Privatisation, Politics, and Economic Performance in Hungary," Cambridge Books, Cambridge University Press, number 9780521593397.
  13. W. A. Naude & W. F. Krugell, 2007. "Investigating geography and institutions as determinants of foreign direct investment in Africa using panel data," Applied Economics, Taylor & Francis Journals, vol. 39(10), pages 1223-1233.
  14. Azemar, Celine & Desbordes, Rodolphe, 2010. "Short-Run Strategies For Attracting Foreign Direct Investment," SIRE Discussion Papers 2010-26, Scottish Institute for Research in Economics (SIRE).
  15. Amiti, Mary, 1998. "New Trade Theories and Industrial Location in the EU: A Survey of Evidence," Oxford Review of Economic Policy, Oxford University Press, vol. 14(2), pages 45-53, Summer.
  16. Desbordes Rodolphe & Vincent Vicard, 2009. "Foreign Direct Investment and Bilateral Investment Treaties: an International Political Perspective," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00395101, HAL.
  17. Peter J. Buckley, 2008. "Do we need a special theory of foreign direct investment for extractive industries?," Journal of Chinese Economic and Foreign Trade Studies, Emerald Group Publishing, vol. 1(2), pages 93-104, December.
  18. Yuko Kinoshita & Nauro F. Campos, 2008. "Foreign Direct Investment and Structural Reforms: Evidence from Eastern Europe and Latin America," IMF Working Papers 08/26, International Monetary Fund.
  19. Agnès Bénassy-Quéré & Nicolas Gobalraja & Alain Trannoy, 2007. "Tax and public input competition," Economic Policy, CEPR;CES;MSH, vol. 22, pages 385-430, 04.
  20. Wheeler, David & Mody, Ashoka, 1992. "International investment location decisions : The case of U.S. firms," Journal of International Economics, Elsevier, vol. 33(1-2), pages 57-76, August.
  21. Patricia Prüfer & Gabriele Tondl, 2009. "The FDI-Growth Nexus in Latin America: The Role of Source Countries and Local Conditions," DEGIT Conference Papers c014_025, DEGIT, Dynamics, Economic Growth, and International Trade.
  22. Bellak, Christian & Leibrecht, Markus & Riedl, Aleksandra, 2008. "Labour costs and FDI flows into Central and Eastern European Countries: A survey of the literature and empirical evidence," Structural Change and Economic Dynamics, Elsevier, vol. 19(1), pages 17-37, March.
  23. Steven Globerman & Daniel Shapiro, 2004. "Governance Infrastructure and U.S. Foreign Direct Investment," International Finance 0404008, EconWPA.
  24. Bevan, Alan A. & Estrin, Saul, 2004. "The determinants of foreign direct investment into European transition economies," Journal of Comparative Economics, Elsevier, vol. 32(4), pages 775-787, December.
  25. Carmen Fernandez & Eduardo Ley & Mark Steel, 1999. "Model uncertainty in cross-country growth regressions," Econometrics 9903003, EconWPA, revised 06 Oct 2001.
  26. Ley, Eduardo & Steel, Mark F.J., 2008. "On the Effect of Prior Assumptions in Bayesian Model Averaging with Applications to Growth Regression," MPRA Paper 6773, University Library of Munich, Germany, revised 06 Jan 2008.
  27. Busse, Matthias & Hefeker, Carsten, 2007. "Political risk, institutions and foreign direct investment," European Journal of Political Economy, Elsevier, vol. 23(2), pages 397-415, June.
  28. Isabel Faeth, 2009. "Determinants Of Foreign Direct Investment - A Tale Of Nine Theoretical Models," Journal of Economic Surveys, Wiley Blackwell, vol. 23(1), pages 165-196, 02.
  29. Rabin Hattari & Ramkishen S. Rajan, 2009. "Understanding bilateral FDI flows in developing Asia," Asian-Pacific Economic Literature, Asia Pacific School of Economics and Government, The Australian National University, vol. 23(2), pages 73-93, November.
  30. Barrell, Ray & Pain, Nigel, 1997. "Foreign Direct Investment, Technological Change, and Economic Growth within Europe," Economic Journal, Royal Economic Society, vol. 107(445), pages 1770-86, November.
  31. Toubal, Farid & Kleinert, Jörn & Buch, Claudia M., 2003. "Determinants of German FDI: New Evidence from Micro-Data," Discussion Paper Series 1: Economic Studies 2003,09, Deutsche Bundesbank, Research Centre.
  32. Andreas Waldkirch, 2010. "The Effects of Foreign Direct Investment in Mexico since NAFTA," The World Economy, Wiley Blackwell, vol. 33(5), pages 710-745, 05.
  33. Etienne Pfister & Bruno Deffains, 2005. "Patent Protection, Strategic FDI and Location Choices: Empirical Evidence from French Subsidiaries' Location Choices in Emerging Economies," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 12(3), pages 329-346.
  34. Manop Udomkerdmongkol & Oliver Morrissey & Holger Görg, 2009. "Exchange Rates and Outward Foreign Direct Investment: US FDI in Emerging Economies," Review of Development Economics, Wiley Blackwell, vol. 13(4), pages 754-764, November.
  35. Clark, Ephraim & Kassimatis, Konstantinos, 2009. "The Effect of Country Default Risk on Foreign Direct Investment," Economia Internazionale / International Economics, Camera di Commercio di Genova, vol. 62(3), pages 342-361.
  36. Noorbakhsh, Farhad & Paloni, Alberto & Youssef, Ali, 2001. "Human Capital and FDI Inflows to Developing Countries: New Empirical Evidence," World Development, Elsevier, vol. 29(9), pages 1593-1610, September.
  37. Christian Bellak & Markus Leibrecht & Robert Stehrer, 2008. "The Role of Public Policy in Closing Foreign Direct Investment Gaps: An Empirical Analysis," wiiw Working Papers 48, The Vienna Institute for International Economic Studies, wiiw.
  38. Christian Bellak & Markus Leibrecht, 2009. "Do low corporate income tax rates attract FDI? - Evidence from Central- and East European countries," Applied Economics, Taylor & Francis Journals, vol. 41(21), pages 2691-2703.
  39. Winford H. Masanjala & Chris Papageorgiou, 2008. "Rough and lonely road to prosperity: a reexamination of the sources of growth in Africa using Bayesian model averaging," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(5), pages 671-682.
  40. Lionel Fontagné & Michaël Pajot, 1998. "Investissement direct à l'étranger et commerce international : le cas français," Revue Économique, Programme National Persée, vol. 49(3), pages 593-606.
  41. Barrell, Ray & Pain, Nigel, 1999. "Domestic institutions, agglomerations and foreign direct investment in Europe," European Economic Review, Elsevier, vol. 43(4-6), pages 925-934, April.
  42. Braconier, Henrik & Norback, Pehr-Johan & Urban, Dieter, 2005. "Multinational enterprises and wage costs: vertical FDI revisited," Journal of International Economics, Elsevier, vol. 67(2), pages 446-470, December.
  43. Klaus E Meyer, 2001. "Institutions, Transaction Costs, and Entry Mode Choice in Eastern Europe," Journal of International Business Studies, Palgrave Macmillan, vol. 32(2), pages 357-367, June.
  44. Jozef Konings & Alan Patrick Murphy, 2006. "Do Multinational Enterprises Relocate Employment to Low-Wage Regions? Evidence from European Multinationals," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 142(2), pages 267-286, July.
  45. Culem, Claudy G., 1988. "The locational determinants of direct investments among industrialized countries," European Economic Review, Elsevier, vol. 32(4), pages 885-904, April.
  46. Adil Suliman & Andre Varella Mollick, 2009. "Human Capital Development, War and Foreign Direct Investment in Sub-Saharan Africa," Oxford Development Studies, Taylor & Francis Journals, vol. 37(1), pages 47-61.
  47. Omar M. Al Nasser, 2007. "The Determinants of the U.S. Foreign Direct Investment: Does the Region Matter?," Global Economic Review, Taylor & Francis Journals, vol. 36(1), pages 37-51.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:zbw:ekhdps:112. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.