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The Effects of Trading Blocs on U.S. Outward FDI Activity: The Role of Extended Market Size

Author

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  • Im, Hyejoon

    (Yeungnam University)

Abstract

I use panel data of sales by the foreign subsidiaries of the U.S. MNCs to examine whether trading blocs create more or less FDI and the impacts on FDI of the extended market size created by forming blocs. By employing a region-fixed effects model, I find that countries forming trading blocs attract more FDI, particularly from non-member countries, but that FDI does not always increase with the market size of the blocs. As the market size increases, FDI increases only for large blocs. However, these findings are sensitive to model specifications. A policy implication is that a country considering forming or joining a trading bloc with a view to attract FDI may want to form a trading bloc with a country or countries with a large market size.

Suggested Citation

  • Im, Hyejoon, 2012. "The Effects of Trading Blocs on U.S. Outward FDI Activity: The Role of Extended Market Size," East Asian Economic Review, Korea Institute for International Economic Policy, vol. 16(2), pages 205-225, June.
    • Handle: RePEc:ris:eaerev:0076
    DOI: 10.11644/KIEP.JEAI.2012.16.2.248
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    Cited by:

    1. Mumtaz Hussain Shah & Yahya Khan, 2016. "Trade Liberalisation and FDI Inflows in Emerging Economies," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 8(1), pages 35-52, April.

    More about this item

    Keywords

    Trading Blocs; Multinational Corporations; Proximity-concentration; Fixed Effects Model;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F15 - International Economics - - Trade - - - Economic Integration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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