Resource title

Estimating the Impact of Time-Invariant Variables on FDI with Fixed Effects

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Resource description

This paper applies the panel fixed effects with vector decomposition estimatorto three FDI datasets to estimate the impact of time-invariant variables on FDI while including fixed effects. We find that the omission of fixed effects significantly biases several of these variables, especially those proxying for trade costs and culture. After including fixed effects, we find that many time-invariant variables indicate the importance of vertical FDI. We also find that by eliminating these biases, the differences across datasets largely disappear. Thus, controversies in the literature that are driven by differences in data sets may be resolved by using this estimation technique.JEL Classification: F14, F23Key Words: Foreign Direct Investment, Trade Costs, Culture

Resource author

Delia Ionascu, Helga Kristjánsdóttir, Ronald B. Davies

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Resource language

eng

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application/pdf

Resource resource URL

http://hdl.handle.net/10398/7610

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