The effects of regional trade agreements on FDI by its origin and type: Evidence from U.S. multinational enterprises activities |
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| Affiliation: | 1. University Jaume I and INTECO, Spain;2. University of Valencia and INTECO, Spain;1. Korea University, 2511, Sejong City, Republic of Korea;2. Korea University of Technology & Education, 1600 Chungjeol-ro, Cheonan City, Republic of Korea;1. College of Science, Swansea University, Singleton Park, Swansea SA2 8PP, UK;2. Geography Department, University of Exeter, Rennes Drive, Exeter, Devon EX4 4RJ, UK;3. Institute of Applied Geoscience, School of Earth and Environment, University of Leeds, Leeds LS2 9JT, UK;4. ACRI-ST, 260 Route du Pin Montard, BP 234, 06904 Sophia-Antipolis, France;5. Brecon Beacons National Park Authority, Cambrian Way, Brecon LD3 7HP, UK;6. Department of Physical Geography, Stockholm University, 106 91 Stockholm, Sweden |
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| Abstract: | The effects of regional trade agreements (RTAs) on foreign direct investment (FDI) depend on both the origin and type of FDI. To estimate the various effects of RTAs, I differentiate between various types of FDI by using data on the sales destinations of foreign subsidiaries of U.S. multinational enterprises (MNEs), while also addressing the endogeneity of RTA formation. Consistent with the theory of MNEs, I find that RTAs reduce horizontal FDI from intra-RTA countries and increase export-platform and total FDI from extra-RTA countries. Moreover, the overall effects of RTAs are positive for extra-RTA FDI, but inconclusive for intra-RTA FDI. The results also support the effect of integrated markets’ economies of scale in inducing extra-RTA FDI. |
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| Keywords: | Horizontal FDI Vertical FDI Export-platform FDI Regional trade agreement Multinational enterprises |
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