The analytics of seasonal migration

A framework that yields different possible patterns of migration as optimal solutions to a simple utility maximization problem is presented and explored. It is shown that seasonal migration arises as an optimal endogenous response to a comparison of costs (of living and of separation) and returns (to work) over a set of three alternative options, even if a year-long migration is feasible.     

Foreign direct investment and bilateral investment treaties: An international political perspective

This paper investigates the effect of the implementation of bilateral investment treaties (BITs) on the bilateral stocks of foreign direct investment (FDI). We argue that the understanding of how BITs affect FDI requires recognizing that multinational enterprises (MNEs) are not Stateless and that their investment return may well depend on the quality of political relations between the home and host countries. Using bilateral FDI data and event data to measure political interactions between countries, we show that the effect of the entry into force of a BIT crucially depends on the quality of political relations between the signatory countries; it increases FDI more between countries with tense relationships than between friendly countries. We also find evidence that BITs and good domestic institutions are complementary. BITs should therefore be understood as a mechanism for host governments to credibly commit not to expropriate investors in the future.     

Foreign direct investment: the role of institutional and cultural determinants

Using panel data for 29 source and 65 host countries in the period 1995–2009, we examine the determinants of bilateral FDI stocks, focusing on institutional and cultural factors. The results reveal that institutional and cultural distance is important and that FDI has a predominantly regional aspect. FDI to developing countries is positively affected by better institutions in the host country, while foreign investors prefer to invest in developed countries that are more corrupt and politically unstable compared to home. The results indicate that foreign investors prefer to invest in countries with less diverse societies than their own.     

Foreign direct investment and the euro: the first five years

This paper assesses the main influences on foreign direct investment(FDI) flows between the major economies in the first five yearsof economic and monetary union (EMU). Using previously unpublisheddata specially provided by Eurostat, it concludes that the hugewave of FDI that reached the Eurozone after EMU was largelya manifestation of the end-of-century takeover boom, a globalphenomenon of which the euro was only a subsidiary cause. Butmuch of the boom in euro economies' FDI disappears if flowsto and from the Belgium–Luxembourg Economic Union (BLEU)(dominated by transhipment via Luxembourg) are removed. On thatbasis, intra-zone FDI turns out to have been weak after EMU,both in relation to previous trends and as a share of majoreconomies' global FDI flows. However, the euro appears to havegiven a modest stimulus to inflows from other major investingeconomies, while the UK share of the latters' outflows has fallenmoderately in the post-EMU period. The policy implications arediscussed.     

The analytics of monetary non-neutrality in the Sidrauski model

This note analytically characterizes the equilibrium dynamics of the Sidrauski model and reaches three conclusions regarding monetary policy: (i) it is typically not neutral, (ii) in some cases, it is not neutral even in the steady state, and (iii) a policy that has the nominal interest rate falling over time may sustain higher output and consumption forever.     

Foreign direct investment and income convergence

The role of foreign direct investment (FDI) in the convergence of income level and growth has been investigated by panel data regressions. Bilateral FDI data from OECD from 1982 to 1997 is used. Income level and growth gaps between source and host countries turn out to decrease as bilateral FDI increases. It is also found that geographical closeness and common language play an important role in convergence in income level and growth.     

Strategic quotas on foreign investment and migration

Summary. A basic two-country, single commodity model is considered to formulate the interactive and retaliative policies with regard to restrictions on foreign investment and labor migration. We model quota retaliations using the contingent threat situation. Under three different strategic environments, we characterize the stable quotas on factor movements. Among other things, we illustrate that either one of the two countries may end up with welfare loss- Ramaswami trap, a concept we introduce in this paper.Received: 28 May 2001, Revised: 5 August 2003, JEL Classification Numbers: F21, F22, C72.I would like to thank Hamid Beladi, Van Ngo Long, participants of Western Economic Association (2001), and an anonymous referee. I am specially grateful to Joseph Greenberg for his invaluable discussions and suggestions.     

Foreign direct investment in Turkey: regional determinants

The uneven regional distribution of foreign direct investment (FDI) in Turkey poses an interesting question from the perspective of multinational firms (MNFs) and policy-makers alike. This paper focuses on the factors governing the location decisions of MNFs within Turkey with specific reference to policy implications. Using a conditional logit model, it is found that agglomeration, depth of local financial markets, human capital, and coastal access dominate location decisions for the aggregate sample of foreign investors in Turkey. This study reveals no evidence that public investment is successful in attracting MNFs to particular regions. Also importantly, the location determinants vary dramatically by broad industrial category, investment composition, and origin-country characteristics, including income category and region.     

Foreign direct investment and civil liberties: A new perspective

The conjecture that democracy discourages foreign direct investment (FDI) has been widely refuted in empirical studies. However, we find support of this view. We distinguish between civil and political liberties and propose that multinational firms tend to invest in countries with low civil but with high political liberties. We show that the negative relationship between civil liberties and FDI is hump-shaped. A threshold level of civil liberties exists, below which repression of civil liberties is associated with more FDI. The results are explained by different economic motives for FDI in different groups of countries.     

Foreign direct investment and exports: a time series approach

The impact of the accelerated internationalization of the last decade on the Austrian economy is a controversial issue. Granger's concept of casuality is used to investigate one aspect of the internationalization of production: the realtionship between foreign outward direct investment and exports using aggregate flow data from the Austrian economy. The stationarity of the time series is examined and cointegration tests for the adequacy of the multivariate time series approach are performed. The estimation results suggest significant causality of Austrian foreign outward direct investment and exports in both directions. Impulse response analysis and varience decomposition show a very slow dynamic response of both variables to exogenous shocks of the other. It furthermnore indicates the possiblity of a positive effect of exogeneously increased foreign direct investment on exports and a negative effect of export shocks on foreign direct investment; however, significant long-run effects are not established.     

Foreign direct investment and spillovers: gradualism may be better

Abstract.  The standard argument says that in the presence of positive spillovers foreign direct investment should be promoted and subsidized. In contrast, this paper claims that the very existence of spillovers may require temporarily restricting FDI. Our argument is based on two features of spillovers: they are limited by the economy's absorptive capacity and they take time to materialize. By letting in capital more gradually, initial investment has the time to create spillovers – and upgrade the economy's absorptive capacity – before further investment occurs. The economy converges to a steady state with a superior technology and a greater capital stock.     

Foreign direct investment in economic transition: the changing pattern of investments

Foreign direct investment into transition economies is reviewed in detail, both from aggregate data and from a survey of senior managers in 117 western manufacturing companies. It is found that host country transition progress, political stability and perceived risk influence FDI inflows as well as the predominant type of investment.     

Foreign direct investment and China's regional income inequality

China's widening regional income inequality coupled with its pronounced regional disparity in foreign direct investment stock since 1990 has claimed the attention of many scholars. While some researchers confirm regional disparity in China's foreign direct investment, others attribute the widening regional income inequality to this regional disparity. This paper thus assesses the impacts of China's stock of foreign direct investment on its regional income inequality using simultaneous equation model and the Shapley value regression-based decomposition approach. Our results suggest that China's stock of foreign direct investment has accounted for merely 2% of its regional income inequality. Furthermore, the contribution ratio of per capita foreign direct investment stock to China's regional income inequality has relatively been on a steady decline since 2002. The decomposition results also reveal that provincial per capita physical assets account for over 50% of the nation's income inequality and 65% of the increases in income inequality since 1990. The other two important determinants of regional income inequality are province location and educational level. However, educational level is found to have a decreasing effect on regional income inequality.     

Foreign direct investment and governance quality in Russia

This paper studies the effect of poor governance quality on foreign direct investment in Russia. Using a survey of businesses across forty administrative districts, we find that higher frequency of using illegal payments and higher pressure from regulatory agencies, enforcement authorities, and criminals, negatively affect foreign direct investment. Our identification strategy builds on the exogenous cross-regional variation in worker strikes during 1895–1914, the period before the October Revolution. We find that moving from the average to the top governance quality across Russian regions more than doubles the FDI stock.     

Agglomeration economies and location choice: Foreign direct investment in Hungary1

Since the beginning of the transition process, Hungary has attracted a significant amount of foreign direct investment (FDI), although this is unevenly distributed among the twenty Hungarian counties. This paper examines the determinants of FDI at a regional level in Hungary and more particularly assesses the importance of agglomeration effects among determinants. A panel model of the location determinants of FDI in Hungary is developed and estimated. Empirical testing suggests that counties with higher labour availability, greater industrial demand and higher manufacturing density attract more FDI. Surprisingly, higher unit labour costs attract FDI. In addition, inter‐industrial agglomeration economies and infrastructure availability are found to be important.