TY - JOUR
T1 - Bilateral FDI flows
T2 - Threshold barriers and productivity shocks
AU - Razin, Assaf
AU - Sadka, Efraim
AU - Tong, Hui
PY - 2008
Y1 - 2008
N2 - A positive productivity shock in the host country tends typically to increase the volume of the desired foreign direct investment (FDI) flows to the host country, through the standard marginal profitability effect. But, at the same time, such a shock may lower the likelihood of making any new FDI flows by the source country, through a total profitability effect, derived from the a general-equilibrium increase in domestic input prices. This is the gist of the theory that we develop in the article. For a sample of 62 OECD and non-OECD countries over the period 1987-2000, we provide supporting evidence for the existence of such conflicting effects of productivity changes on bilateral FDI flows. We also uncover sizeable threshold barriers in our data set.
AB - A positive productivity shock in the host country tends typically to increase the volume of the desired foreign direct investment (FDI) flows to the host country, through the standard marginal profitability effect. But, at the same time, such a shock may lower the likelihood of making any new FDI flows by the source country, through a total profitability effect, derived from the a general-equilibrium increase in domestic input prices. This is the gist of the theory that we develop in the article. For a sample of 62 OECD and non-OECD countries over the period 1987-2000, we provide supporting evidence for the existence of such conflicting effects of productivity changes on bilateral FDI flows. We also uncover sizeable threshold barriers in our data set.
KW - FDI
KW - Productivity
KW - Threshold barriers
UR - http://www.scopus.com/inward/record.url?scp=51349164537&partnerID=8YFLogxK
U2 - 10.1093/cesifo/ifn025
DO - 10.1093/cesifo/ifn025
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AN - SCOPUS:51349164537
SN - 1610-241X
VL - 54
SP - 451
EP - 470
JO - CESifo Economic Studies
JF - CESifo Economic Studies
IS - 3
ER -