Social and Behavioral Sciences Commons^™

Fire-Sale Fdi? The Impact Of Financial Crises On Foreign Direct Investment, Olga B. Stoddard, Ilan Noy

Faculty Publications

We analyze the evolution of foreign direct investment (FDI) inflows to developing and emerging countries around financial crises. We empirically examine the Fire-Sale FDI hypothesis and describe the pattern of FDI inflows surrounding financial crises. We also add a more granular detail about the types of financial crises and their potentially differential effects on FDI. We distinguish between mergers and acquisitions(M&A) and greenfield investment, as well as between horizontal (tariff jumping) and vertical (integrating production stages) FDI. We find that financial crises have a strong negative effect on inward FDI in our sample. Crises are also shown to reduce the …

Determinants Of Economic Growth In Nigeria, Kazeem B. Ajide

CBN Journal of Applied Statistics (JAS)

This paper investigates the role of Frazer Economic Freedom Index on FDI-growth relationship over the period spanning 1980 through 2010 using annual time series data. A Multivariate Regression approach was employed to estimate augmented growth models. Quite intriguingly, the impact of disaggregated economic freedom over aggregated composite index was found profoundly revealing. Emanated results show that the same set of variables like labour, life expectancy, degree of openness and economic freedom are factors affecting the level of economic growth in both but at different levels of significance. However, the estimates of disaggregated components of economic freedom data show that the …

Eu-China Economic Relations: Interactions And Barriers, Zheng Lu

Zheng Lu (Chinese: 路征)

EU-China economic interactions became more and more frequent in the past decades, nowadays EU and China are main trade partner for each other. This paper analyzed EU-China economic interactions from three dimensions: bilateral governmental interactions, trade and investment flows as well as barriers to trade and investment. Findings show that EU-China close relationship is particularly based on goods trade especially on intra-industrial trade of manufacturing industrial products, and trade imbalance is arising from trade in Machinery and Transport Equipment and Other Manufactured Goods (e.g., Clothing and clothing accessories); This paper also found that there exist a myriad of trade and …

The Impact Of Institutional Quality In Attracting Foreign Direct Investment In Algeria, Bounoua Chaib, Matallah Siham

Topics in Middle Eastern and North African Economies

This study examines the impact of institutional quality in attracting FDI in Algeria over the period 1995-2011 using the Heritage Foundation’s economic freedom index which reflects economic institutional quality (EIQ) and two governance indicators, namely: government effectiveness (GE) and voice and accountability (VA) that represent political institutional quality. The Johansen cointegration test has been employed in order to investigate the existence of long-run relationships among the tested variables. Additionally, the vector error correction model (VECM) has been applied to analyze the long-run and short-run dynamic relationships among the various time series, besides using both impulse response functions and variance decomposition. …

How Is Sectoral Fdi Affecting Firms’ Performance In Mozambique?, Nilza A. Abdurramane

Master's Theses

I study the effect of sectoral FDI on firms’ performance in Mozambique from 2007 to 2010 through productivity and efficiency functions, using comprehensive firm level data. Although foreign ownership has a positive effect on firms’ productivity, my results show that in general, sectoral FDI has a negative and statistically significant effect on Mozambican firms’ productivity. The findings of this study are similar to previous studies that argued that positive foreign spillovers were not automatic. Using a stochastic frontier model, to measure efficiency, I find that in general foreign firms tend to be more efficient than domestic firms. However, using this …

Delayed Complementarity: How Schengen Area Membership Influenced German And Austrian Investment In Central And Eastern Europe, Romy L. Franks

Claremont-UC Undergraduate Research Conference on the European Union

This paper considers the mutually beneficial relationship of German and Austrian foreign direct investment (FDI) in Central and Eastern Europe (CEE) between 2004 and 2007, and the impact that the CEE states' belated membership in the Schengen Area had on further economic integration. It analyzes how excluding CEE member states from immediate membership in the Schengen Area upon their accession to the EU in 2004 and 2007 affected the economies of Germany, Austria, and the CEE member states. The paper argues that, in reviewing actual FDI and migration numbers following EU enlargements, fears over the potentially negative effects of labor …

Does Heterogeneity In Transfer Pricing Regulation Affect Foreign Direct Investment?, Quoc Hung Tran

Economics Faculty Publications

Does multinational firm take advantage of arbitrage opportunities when heterogeneity in transfer pricing regulations exist between home and host country? Using data on U.S. based multinational firms’ reinvestment earnings abroad as a proxy for FDI activity, provided by the BEA Survey of U.S. Direct Investment Abroad and the Balance of Payments Survey, we analyze the effect of transfer pricing regulation of multination firm FDI’s decision. The analysis results provide no empirical evidence that differences in transfer pricing regulation between home and host country affect FDI activity by U.S. based multinational firms. Host country’s specific characteristics such as market size, distant …

The Interaction Between Fdi And Infrastructure Capital In The Development Process, Farrokh Nourzad, David N. Greenwold, Rui Yang

Economics Faculty Research and Publications

This paper focuses on the possible interaction between foreign direct investment (FDI) and the host country’s infrastructure base. Its central hypothesis is that the effect of FDI on per capita real income depends, at least in part, on the size of the recipient country’s infrastructure. This hypothesis is tested in a panel of 46 countries and 5-year averages over the 1980–2000 period using the size of three types of infrastructure capital: telecommunication, power generation, and network of roads or highways. The results indicate that the size of the host country’s infrastructure base helps to improve the marginal effect of FDI …

Higher Education And Foreign Direct Investment: A Study Of Mexican States, Yuyinska Krystal Sanchez-Osio

Open Access Theses & Dissertations

Factors that attract Foreign Direct Investment in Mexico at the state level are analyzed. Special focus is placed on how human capital promotes growth by attracting more FDI flows in a state. A model that explains the amount of FDI received in Mexico in 2012 is developed at a subnational level. The main independent variable is human capital, and it is measured using percentage of university graduates. The model controls for other possible determinant factors such as population, infrastructure, wages, fiscal incentives, geographic location, ease of doing business, and past experience in attracting FDI. It is tested using ordinary least …

Africa Rising: Corruption & Foreign Direct Investment Inflows, Kunaal A. Chande

CMC Senior Theses

Using a panel data set spanning from 2005 to 2012 and drawn from 35 Sub-Saharan

African countries, this paper examines the relative impact of corruption on the

inflow of foreign direct investment. This study is motivated by the recent influx of

political and media attention on the African continent that is poised to receive

billions of dollars in investment over the coming years. It is argued in this paper that

there is no significant link between the two variables. There did appear to be a

negative skew meaning higher levels of perceived corruption resulted in less FDI

inflows, while few …

Do Foreign Direct Investment And Foreign Aid Promote Good Governance In Africa?, Adugna Lemi, Blen Solomon, Sisay Asefa

Adugna Lemi

The literature on the roles that governance/political and economic stability play to attract capital flows into African economies has been burgeoning. Good governance, liberalization, infrastructure, incentive packages have been regarded as cures to break the deadlock to reverse the economic plight, to attract inflow of capital and, in some cases, to reverse outflows of African economies. The flow of capital, however, has undesirable side effects on host economies’ working conditions, environmental standard, inequality, and culture, among others. These economic and social external or negative spillover effects are due to the phenomenon of “race-to-the-bottom” where companies invest in economies with lax …

How Foreign Firms Transformed Ireland’S Domestic Economy, Paul Donnelly

Articles

Today, Ireland is host to 1,033 multinational corporations. They directly employ 152,785 and account for 70 per cent or €122.5bn of exports. It’s a story that has its roots in the 1940s.

Do Foreign Direct Investment And Foreign Aid Promote Good Governance In Africa?, Adugna Lemi, Blen Solomon, Sisay Asefa

International Journal of African Development

The literature on the roles that governance/political and economic stability play to attract capital flows into African economies has been burgeoning. Good governance, liberalization, infrastructure, incentive packages have been regarded as cures to break the deadlock to reverse the economic plight, to attract inflow of capital and, in some cases, to reverse outflows of African economies. The flow of capital, however, has undesirable side effects on host economies’ working conditions, environmental standard, inequality, and culture, among others. These economic and social external or negative spillover effects are due to the phenomenon of “race-to-the-bottom” where companies invest in economies with lax …

Fdi Spillovers In Tanzania`S Manufacturing Sector, Johansein Rutaihwa

Johansein Rutaihwa

Using cross sectional data, this study analyses the spillover effects of foreign direct investment in Tanzania’s manufacturing sector. The findings reject a proposition that FDI intensity has improved domestic manufacturing firms productivity; no vertical technological spillovers occurred and a negative correlation between vertical spillover and FDI presence was found. Instead there is a positive correlation between FDI and horizontal technology spillover. The study, therefore, recommends that the government should make concerted efforts to ensure that FDI promotion addresses technology spillovers both within the industry and across the sector; as well as strengthening and widening the education system to enable it …

Fdi And Absorptive Capacity In Emerging Economies, Nagwa Hosny Khordagui, Gehan Saleh

Topics in Middle Eastern and North African Economies

Inward FDI is believed to promote economic growth and transfer technology across countries. This led many economies to promote policies that encourage and support inward FDI. Researchers have been undertaking empirical research to determine whether inward FDI does in fact have the proclaimed effect on the economy. The findings from the studies on the spillover effects of FDI are mixed. More recent studies explain that it is not a matter of whether FDI influences the host country’s economy; but rather of whether the necessary factors for the existence of spillover effects are present. This raises the issue of what is …

Examining The Institutional Framework For Investment In Tanzania: A Perspective From The Executive Opinion Survey, 2012-13, Johansein L. Rutaihwa

Johansein Rutaihwa

This policy brief looks at the country-level findings from the 2012/13 Global Competiveness Report prepared for the World Economic Forum; highlights the current institutional set up in relation to investment; and identifies institutional and policy reforms that could stimulate growth and make Tanzania more competitive on the global market.

Business Cycle Determinants Of Us Foreign Direct Investments, Lilia Cavallari, Stefano D'Addona

Lilia Cavallari

This article investigates the role of output fluctuations and exchange rate volatility in driving US FDIs. Using a sample of 46 economies over the period 1982 to 2009, we provide the evidence of a positive relation between US FDI and host country’s cyclical conditions. Allowing for asymmetry over the business cycle, we find that the output elasticity of foreign investments is higher in booms than in recessions. An increase in exchange rate volatility, on the other hand, has a strong deterrent effect on US foreign investments. This effect is fairly stable over the business cycle.

International R&D Transfer And Technical Efficiency: Evidence From Panel Study Using Stochastic Frontier Analysis, Miao Wang, M. C. Sunny Wong

Economics Faculty Research and Publications

We study the effect of foreign research and development (R&D) transferred through imports and foreign direct investment (FDI) on domestic technical efficiency using stochastic frontier analysis. Unbalanced panel results from a 77-country sample over 1986–2007 show that FDI- and imports-transferred foreign R&D have a significant impact on domestic country’s technical efficiency. Furthermore, we observe a complementarity between FDI-transferred R&D and domestic human capital. In other words, the domestic country needs to obtain a threshold level of human capital to benefit from FDI-transferred R&D. Other macro conditions such as infrastructure, political stability, and urbanization also help to improve the technical efficiency …

Output And Interest Rate Volatility As Determinants Of Fdi, Lilia Cavallari, Stefano D'Addona

Lilia Cavallari

This paper examines the role of country-specific sources of output and interest rate volatility in driving FDI activities. Building on a dataset that comprises bilateral FDI flows among 24 OECD economies over the period 1985-2007, we find that output and interest rate volatility mainly act as push factors, i.e. they are more effective in deterring rather than encouraging foreign investments. A rise in host country volatilities does reduce the amount of FDI outflows in the recipient country, even after controlling for the state of the cycle. Source country volatilities, on the contrary, do not have a systematic effect on foreign …

El Vínculo Inversión Extranjera Directa Y Desigualdad Salarial En Los Estados Mexicanos, Vicente German-Soto, Nohemí Marcela Ríos González

Vicente German-Soto

Fdi, Education, And Economic Growth: Quality Matters!, Miao Wang, M. C. Sunny Wong

Economics Faculty Research and Publications

In this paper, we revisit the results from the influential study by Borensztein et al. (Journal of International Economics 45:115–135, 1998), which argues that inward foreign direct investment (FDI) promotes the economic growth in a less developed host country only when the host country obtains a threshold level of secondary schooling. Borensztein et al. (Journal of International Economics 45:115–135, 1998) only focus on the quantity of education. We take into consideration both the quantity and the quality of education. We adjust the original schooling data in Borensztein et al. (Journal of International Economics 45:115–135, 1998) by two quality of education …

Three Essays On Fdi In China, Mingming Pan

College of Business: Dissertations, Theses, and Student Research

Foreign Direct Investment (FDI) has contributed a great deal to China’s extraordinary growth by injecting capital into the economy, creating jobs, transferring technology and knowledge, enhancing trade, bringing in competition for local enterprises, improving the quality of local labor and intermediate goods suppliers, and connecting China’s gradually opening economy to the global market. For over a decade, China has been the second largest recipient of inward FDI in the world behind the United States. In 2009, China received $95 billion, which is 8.5% of the world’s total. However, the large amount of inward FDI has been unevenly distributed across Chinese …

The Gravity Of R&D Fdis, Antonello Zanfei, Davide Castellani, Alfredo Jimenez Palmero

Antonello Zanfei

The gravity model predicts that international trade and FDI should fade with geographic distance. The negative effect of distance is justified by the existence of transport costs which hamper the international exchange of final and intermediate goods, and by higher uncertainty about local markets. We submit that distance plays a remarkably different role in the case of R&D FDIs since they mainly involve the international transfer, absorption and use of knowledge. Using data on bilateral investment projects in R&D, manufacturing and other business activities between 58 countries, we find that geographic distance does not hinder R&D FDIs as much as …

The Role Of Institutional Quality In Fdi Inflows In Sub-Saharan Africa, Mulugeta Kahsai, Yohannes G. Hailu, Chali Nondo, Peter V. Schaeffer

Regional Research Institute Working Papers

During the period 2000 to 2008, Africa’s collective GDP grew at an annual rate of 4.9 percent. Even though previous studies argue that strengthened and improved institutional quality is key determinant for attracting foreign direct investment to Africa, we find no evidence to that effect. Using a panel data for 45 Sub-Saharan African countries (SSH), we estimate the role of institutional quality (governance) in attracting FDI inflow during the 1996-2007 period. After controlling for country and time specific effects and the economic environment of the host country, we find no significant evidence of the impact of institutional quality on FDI …

Determinants Of Foreign Direct Investment In Services Sector Of Pakistan: An Econometrics Approach, Muhammad Zahid Awan, Khair Uz Zaman, Bakhtiar Khan

Business Review

This study examines the key determinants of FDI inflows in Services sector of Pakistan, using time series data (quarterly) for the period of 1996Q1-2008Q4. To check the stationarity of the data, ADF test has been applied. Co-integration and Error Correction Model (ECM) is used for estimation of the data. This study found that Gross Domestic Fixed Capital formation (GDFCF), Inflation Rate(INF), Current Account Balance(CAB), Exchange Rate (ER), and Per Capita Income (PC) are main factors of FDI inflows in services sector of Pakistan. This study reveals that GDFCF, INF and PC are found statistically significant with positive signs. CAB and …

The Effects Of Economic Factors In Determining The Transition Process In Europe And Central Asia, David A. Lopez

Award Winning Economics Papers

This paper examines how economic determinants affect foreign direct investment into a sample of Western European and transition countries from 1990 to 2003. The observed differences in the flow of foreign investment into the transition countries, relative to those in Western Europe, provokes the question of whether this phenomenon was determined by the economic factors present in those countries. Using a conceptual model constructed from economic factors that affect FDI inflows, this study considers the sample set for two sub-periods in the transition process, namely the early period from 1990 to 1998 and the later period from 1998 to 2003. …

The Investigation Of Foreign Direct Investment Patterns In Russia, Tamilla Curtis, Tom Griffin, Lucyna Kornecki

Dr. Tamilla Curtis

No abstract provided.

Exports And Productivity Selection Effects For Dutch Firms, Henk Lm Kox, Hugo Rojas Romogosa

Henk LM Kox

Globalization And The Wage-Working Conditions Relationship: A Case Study Of Cambodian Garment Factories, Cael Warren

Economics Honors Projects

The wage premiums for firm-level foreign exposure (exporting and foreign ownership) have been well documented in the literature, and their potential sources have been studied in depth. Compensating differentials and efficiency wages are two distinct explanations (with radically different implications for worker welfare) for wage gaps that persist between firms despite controls for firm and worker characteristics. We use a comprehensive dataset of working conditions and wage compliance in Cambodia’s exporting garment factories to explore (1) the impact of foreign ownership on wages and working conditions, (2) whether the relationship between wages and working conditions within these exporting factories more …

Is The Impact Really That High? The Effect Of Fdi In Transition, Jan Hagemejer, Joanna Tyrowicz

Joanna Tyrowicz

Literature is not clear on the effect of FDI on the economic performance in hosting countries. The analysed eects include productivity, propensity to export, access to financial markets, etc. Although foreign subsidiaries usually perform better than the average of the hosting economies, sometimes the selection eect is found to be considerable. The analysed eects In this paper we use a unique dataset based on accounting annual reports to the statistical authorities by all medium and large Polish enterprises over a period 1997-2006. We apply a propensity score matching technique to disentangle the effect of self-selection and FDI entry (treatment). We …