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Determinants of foreign direct investment
Author(s) -
Blonigen Bruce A.,
Piger Jeremy
Publication year - 2014
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/caje.12091
Subject(s) - foreign direct investment , openness to experience , covariate , gravity model of trade , econometrics , host (biology) , economics , variables , set (abstract data type) , variable (mathematics) , international economics , investment (military) , gravity equation , inclusion (mineral) , bilateral trade , business , statistics , macroeconomics , geography , mathematics , computer science , political science , law , ecology , mathematical analysis , archaeology , biology , psychology , social psychology , china , programming language , politics , gender studies , sociology
Empirical studies of bilateral foreign direct investment (FDI) activity show substantial differences in specifications with little agreement on the set of included covariates. We use Bayesian statistical techniques that allow one to select from a large set of candidates those variables most likely to be determinants of FDI activity. The variables with consistently high inclusion probabilities include traditional gravity variables, cultural distance factors, relative labour endowments and trade agreements. There is little support for multilateral trade openness, most host‐country business costs, host‐country infrastructure and host‐country institutions. Our results suggest that many covariates found significant by previous studies are not robust.