Do Neighbors of Host Countries Matter to Aggregate US FDI Outflows?

Francis Kemegue ()
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Francis Kemegue: Department of Economics, University of Pretoria

No 200929, Working Papers from University of Pretoria, Department of Economics

Abstract: Modeling spatial interaction among contiguous host countries receiving foreign di- rect investment from the same source country is usually conceived as reflection of market seeking behaviors or cost saving strategies of firms executing location arbitrage. This paper approaches the contiguity in aggregate data from the same source country as an incentive driven process where stocks attract new flows in the neigh- borhood of the stock location. We examine the influence of geographic neighbors on new flows of FDI from the United States in 3 different clusters in the world. The results show that host country's neighbors matter to new flows of FDI, however, they also indicate that, across clusters, cross countries spillovers are associated with non- manufacturing FDI (investments in services) but not with manufacturing FDI.

Keywords: Foreign direct investment; Spillovers; Spatial autocorrelation (search for similar items in EconPapers)
JEL-codes: C33 F21 F23 G14 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2009-12
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:200929

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