Trade, direct investment and production policies

Includes bibliography

Tax differentials and inflow of foreign direct investments : evidence from foreign operations of U.S. multinational companies

This paper concerns the measurement of the impact of tax differentials across countries on inflow of Foreign Direct Investment (FDI) by using comprehensive data on the foreign operations of U.S. multinational corporations that has been collected by the Bureau of Economic Analysis (BEA), the U.S. Department of Commerce. In particular, this research focuses on examining: (1) how responsive FDI locations are to tax differentials across countries, (2) how different the tax effect on FDI inflow is between developed and developing countries, and (3) whether investment location decisions have become more or less sensitive to tax differences between countries over time ranging from the late 1990s to the early 2000s. Estimation results suggest that high rates of corporate income taxation are associated with reduced foreign assets of U.S. multinational firms in all industries by decreasing the return to foreign asset investment. Further, foreign assets of U.S. multinationals in all industries have become more responsive to non-income tax differentials across countries than to income tax differences from 1999 to 2004. Empirical estimates also indicate that foreign investment by American firms is associated with higher tax sensitivity more in developed countries than in those that are developing.

Did Japanese direct investment in Korea suppress indigenous industrialization in the 1930s? : evidence from country-level factory entry patterns

Foreign direct investment (FDI) can deliver both positive and negative spillovers to the local economy. Negative effects such as crowding-out or entry-barrier effects might outweigh the positive ones when the technological gap between foreign and local firms is significant. This paper examines the impact of Japanese direct investment into Korea under colonization in the 1930s on the entry of Korean-owned factories. By using the census of manufacturing factories in Korea, we exploit variations in the share of Japanese factories and their entry rates across counties within the same subsectors. We find that within a subsector, entry rates of Korean factories were higher in counties with higher presence and entry of Japanese factories. Positive correlations are also found between subsectors. The results imply that Japanese direct investment did not suppress the entry of Korean factories and that FDI could exert positive entry spillovers on indigenous firms, even at a very early stage of industrialization.

Industrial performance, agglomeration, and foreign manufacturing investment in the UK

This paper examines the relationship between the comparative advantage of UK industries, and new inward investment into these industries. The paper demonstrates that the extent of foreign manufacturing investment in an industry, and the spatial agglomeration of that industry, are significant determinants of industry comparative advantage, thus providing evidence of agglomeration benefits to both domestic and foreign firms. The paper then shows that industry comparative advantage itself, toegther with a series of industry specific characteristics, are important determinants of new foreigh manufacturing investment, thus providing evidence of the dynamic benefits of foreign direct investment in the UK economy.

Theory of foreign portfolio investment

This dissertation examines one category of international capital flows, private portfolio investments (private refers to the source of capital). There is an overall lack of a coherent and consistent definition of foreign portfolio investment. We clarify these definitional issues.^ Two main questions that pertain to private foreign portfolio investments (FPI) are explored. The first problem is the phenomenon of home preference, often referred to as home bias. Related to this are the observed cross-investment flows between countries that seem to contradict the textbook rendition of private FPI. A description of the theories purporting to resolve the home preference puzzle (and the cross-investment one) are summarized and evaluated. Most of this literature considers investors from major developed countries. I consider--as well--whether investors in less developed countries have home preference.^ The dissertation shows that home preference is indeed pervasive and profound across countries, in both developed and emerging markets. For the U.S., I examine home bias in both equity and bond holdings as well. I find that home bias is greater when we look at equity and bond holdings than equity holdings solely.^ In this dissertation a model is developed to explain home bias. This model is original and fills a gap in the literature as there have been no satisfactory models that handle at the same time both home preference and cross-border holdings in the context of information asymmetries. This model reflects what we see in the data and permits us to reach certain results by the use of comparative statics methods. The model suggests, counter-intuitively, that as the rate of return in a country relative to the world rate of return increases, home preference decreases. In the context of our relatively simple model we ascribe this result to the higher variance of the now higher return for home assets. We also find, this time as intended, that as risk aversion increases, investors diversify further so that home preference decreases.^ The second question that the dissertation deals with is the volatility of private foreign portfolio investment. Countries that are recipients of these flows have been wary of such flows because of their perceived volatility. Often the contrast is made with the perceived absence of volatility in foreign direct investment flows. I analyze the validity of these concerns using first net flow data and then gross flow data. The results show that FPI is not, in relative terms, more volatile than other flows in our sample of eight countries (half were developed countries and the rest were emerging markets).^ The implication therefore is that restricting FPI flows may be harmful in the sense that private capital may not be allocated efficiently worldwide to the detriment of capital poor economies. More to the point, any such restrictions would in fact be misguided. ^

The impact of the direct foreign investment in Colombia

La inversión extranjera directa en Colombia es un asunto que particularmente desde 1990 ha venido tomando fuerza y que a su vez genera múltiples cuestiones. Para abordar el impacto que la IED ha tenido en Colombia se hace necesario hacer un acercamiento teórico para comprender el concepto, pasando por el estudio del caso latinoamericano para después seleccionar los principales sectores de la economía colombiana y en los cuales la IED ha jugado un rol destacado, como es el caso del sector financiero, la industria manufacturera, el sector de electricidad, gas y agua, el sector de transporte, almacenamiento y comunicaciones y el sector petróleo. Con ello en mente será posible establecer y medir el impacto económico de la IED, tomando como principal indicador la correlación entre la IED y PIB por sector y otros aspectos como el impacto en el empleo y la transferencia de conocimiento y tecnología. Igualmente es necesario abordar la perspectiva del inversionista y los riesgos y beneficios que corre al invertir en Colombia, esto permitirá ampliar el campo de análisis y establecer otras relaciones e impactos conexos de la IED en los aspectos sociales y culturales del país. Gracias a estos análisis será posible emitir un juicio de valor sustentado en un análisis científico detallado sobre el verdadero impacto de la IED y extendiéndose más allá del campo económico.

Home bias persistence in foreign direct investments

The purpose of this paper is to analyse the issues related to home bias and foreign direct investments (FDIs). We study the role of physical, cultural, and institutional distances from home on FDI decisions taken by corporations to assess whether the globalization of the past two decades has reduced their influence. Using the ‘home bias’ framework from the finance literature and the gravity model from the economics literature, we utilize a large sample of both developed and emerging markets, using FDI flows of 6263 unique bilateral country pairs over a 30-year period. We find strong empirical evidence of persistent home bias in FDI outflows, and we show that not only physical distance but also cultural and institutional similarities between host and source countries remain a decisive factor in foreign corporate investment decisions. We also show that such home bias is persistent over time and is observed around the world.

Foreign Investment in Latin America and the Caribbean 2001

Includes bibliography

Foreign Investment in Latin America and the Caribbean 2002

Includes bibliography

Foreign Investment in Latin America and the Caribbean 2003

Includes bibliography

Foreign Investment in Latin America and the Caribbean 2004

Includes bibliography

Foreign Investment in Latin America and the Caribbean 2005

Includes bibliography

Foreign Investment in Latin America and the Caribbean 2006

Includes bibliography

Foreign Investment in Latin America and the Caribbean 1999

Includes bibliography