FDI in space: Spatial autoregressive relationships in foreign direct investment

There are a number of theoretical reasons why foreign direct investment (FDI) into a host country may depend on the FDI in proximate countries. Such spatial interdependence has been largely ignored by the empirical FDI literature, with only a couple recent papers accounting for such issues in their estimation. This paper conducts a general examination of spatial interactions in empirical FDI models using data on US outbound FDI activity. We find that estimated relationships of traditional determinants of FDI are surprisingly robust to inclusion of terms to capture spatial interdependence, even though such interdependence is estimated to be significant. However, we find that both the traditional determinants of FDI and the estimated spatial interdependence are quite sensitive to the sample of countries one examines.     

The Effects of NAFTA on Antidumping and Countervailing Duty Activity

Treatment of unfair trade laws has become an important topicin negotiations on preferential trading areas. Recent preferentialtrading areas involving the United States, one of the most significantusers of these laws, have established special binational disputesettlement panels to arbitrate disagreements. Using a paneldatabase of U.S. antidumping and countervailing duty activityfrom 1980 through 2000, the article examines whether the useof dispute settlement panels has reduced such activity betweenthe United States and its North American Free Trade Agreementpartners. The analysis finds little evidence for any effect,calling into question the effectiveness of dispute settlementpanels in reducing unfair trade law activity.     

The Effects of Bilateral Tax Treaties on U.S. FDI Activity

The effects of bilateral tax treaties on FDI activity have been unexplored, despite significant ongoing activities by countries to negotiate and ratify these treaties. This paper estimates the impact of bilateral tax treaties using both U.S. inbound and outbound FDI over the period 1980–1999. Robust to a wide variety of alternative specifications, we find little evidence that bilateral tax treaties increase FDI activity, contrary to OECD-stated goals for such treaties.     

Comovement in GDP trends and cycles among trading partners

It has long been recognized that business cycle comovement is greater between countries that trade more intensively with one another. However, nations face shocks to both the cyclical and trend components of their GDP series. Contrary to the result for cyclical fluctuations, we find comovement of shocks to the trend component of real GDP is weaker among countries that trade more intensively with one another. We simulate changes in ten-year output growth correlations corresponding to the estimated effects of trade and show that the impact of trade on trend comovement is quantitatively more important than its effect on cyclical comovement.     

Measuring the benefits of foreign product variety with an accurate variety set

Recent studies have used import data to assess the impact of foreign varieties on domestic prices and welfare. We employ a market-based data set on the U.S. automobile market that allows us to define goods varieties at a more precise level, as well as discern location of production and ownership of varieties. Our estimates of price and welfare changes from new varieties in the U.S. automobile sector are twice as large as standard estimates when using our detailed market-based data. We also show that new varieties introduced by foreign-owned affiliates provided an additional 70% welfare gain during our sample.     

R&D Intensity and Acquisitions in High-Technology Industries: Evidence from the US Electronic and Electrical Equipment Industries

Theory suggests R&D intensity and acquisition activity may be either directly or inversely related. However, we know relatively little about which firms are responsible for acquisition activity in high-technology industries, which are not only R&D-intensive, but also have substantial acquisition activity in the United States. Using a panel of 217 US electronic and electrical equipment firms from 1985–93 and limited dependent variable estimation techniques, we find a substantial negative correlation between R&D-intensity and a firm's propensity to acquire. This result is surprisingly robust to numerous sensitivity tests and is significant in both the 'within' and 'between' dimensions of our data.     

Antidumping and retaliation threats

We propose and test two ways in which retaliation threats may dampen the antidumping (AD) activity we observe. First, the threat of retaliatory AD actions may make a domestic industry less likely to name a foreign import source in an AD petition. Second, the prospect of a GATT/WTO trade dispute may make government agencies less likely to rule positive in their AD decision. Using a nested logit framework, we find evidence that both retaliation threats substantially affect US AD activity from 1980 through 1998.     

Tariff-jumping antidumping duties

This paper examines the tariff-jumping response of all firm and product combinations subject to US antidumping investigations from 1980 to 1990 using a newly constructed database. Previous studies have focused only on Japanese FDI responses to antidumping protection and found large tariff-jumping responses. In contrast, this paper finds quite modest tariff-jumping responses and the evidence suggests that tariff-jumping is only a realistic option for multinational firms from industrialized countries. This may partially explain developing countries’ concerns about addressing AD protection in the WTO. Despite high tariff-jumping responses, there is no evidence of a Japanese-specific propensity to tariff-jump, holding other economic factors constant.     

Evolving discretionary practices of U.S. antidumping activity

Abstract .  Using data on U.S. dumping margin calculations by the U.S. Department of Commerce (USDOC), we first document the rapid rise in U.S. dumping margins from around 15% in the early 1980s to over 60% by 2000. Second, statistical analysis finds that USDOC discretionary practices have played the major role in rising U.S. dumping margins over this period. Importantly, the evolving effect of discretionary practices is due not only to increasing use of these practices over time, but to apparent changes in implementation of these practices that mean a higher increase in the dumping margin whenever they are applied.     

Determinants of foreign direct investment

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.