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The clustering of FDI in India: the importance of peer effects

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  • Peter Nunnenkamp
  • Megha Mukim

Abstract

We assess the location choices of 6020 foreign investors at the level of Indian districts. Employing conditional logit models, we find that clustering of Foreign Direct Investment (FDI) is driven strongly by herding among investors from both, the same and other countries of origin. However, the behaviour of Nonresident Indians (NRIs) and German investors is strikingly different.

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  • Peter Nunnenkamp & Megha Mukim, 2012. "The clustering of FDI in India: the importance of peer effects," Applied Economics Letters, Taylor & Francis Journals, vol. 19(8), pages 749-753, May.
    • Handle: RePEc:taf:apeclt:v:19:y:2012:i:8:p:749-753
    DOI: 10.1080/13504851.2011.602007
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    1. Crozet, Matthieu & Mayer, Thierry & Mucchielli, Jean-Louis, 2004. "How do firms agglomerate? A study of FDI in France," Regional Science and Urban Economics, Elsevier, vol. 34(1), pages 27-54, January.
    2. Miss Catriona Purfield, 2006. "Mind the Gap—Is Economic Growth in India Leaving Some States Behind?," IMF Working Papers 2006/103, International Monetary Fund.
    3. Timothy Besley & Robin Burgess, 2004. "Can Labor Regulation Hinder Economic Performance? Evidence from India," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 91-134.
    4. Svetlana Ledyaeva, 2009. "Spatial Econometric Analysis of Foreign Direct Investment Determinants in Russian Regions," The World Economy, Wiley Blackwell, vol. 32(4), pages 643-666, April.
    5. Crozet, Matthieu & Mayer, Thierry & Mucchielli, Jean-Louis, 2004. "How do firms agglomerate? A study of FDI in France," Regional Science and Urban Economics, Elsevier, vol. 34(1), pages 27-54, January.
    6. repec:hal:spmain:info:hdl:2441/c8dmi8nm4pdjkuc9g8o118937 is not listed on IDEAS
    7. repec:hal:wpspec:info:hdl:2441/c8dmi8nm4pdjkuc9g8o118937 is not listed on IDEAS
    8. Gustavo J. Bobonis & Howard J. Shatz, 2007. "Agglomeration, Adjustment, and State Policies in the Location of Foreign Direct Investment in the United States," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 30-43, February.
    9. Cheng, Leonard K. & Kwan, Yum K., 2000. "What are the determinants of the location of foreign direct investment? The Chinese experience," Journal of International Economics, Elsevier, vol. 51(2), pages 379-400, August.
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    Cited by:

    1. Frank Bickenbach & Wan-Hsin Liu & Peter Nunnenkamp, 2015. "Regional concentration of FDI in post-reform India: A district-level analysis," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 24(5), pages 660-695, August.
    2. Gourab Chakraborty, 2018. "Sub-National Location Determinants of Inward Foreign Direct Investment: A Statistical Appraisal Across Regions in India," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 8(8), pages 1026-1041, August.
    3. Tushar Ranjan Panigrahi & Sunita Mall, 2017. "Relationship Between Fdi Distribution And Regional Economic Aggregates: An Evidence From India," Romanian Economic Business Review, Romanian-American University, vol. 12(4), pages 109-124, december.

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    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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