{"title":"The Determinants of FDI Reinvestment Rates","authors":"Balázs Zélity","doi":"10.1007/s11079-024-09763-8","DOIUrl":null,"url":null,"abstract":"<p>Profits accruing to foreign-owned firms can either be repatriated to the origin country or reinvested in the host country. Using bilateral country-level FDI earnings flow data, this paper empirically investigates what determines how much is reinvested in a given country. Panel data regressions are estimated on OECD country pairs for the time period 2005-2020 with origin and host country fixed effects. Macroeconomic conditions, institutional factors, agency problems, taxation, and global economic factors are considered as explanatory variables. Lagged independent variables are used as instruments in a 2SLS specification. The main finding is that geographical distance and the world GDP growth rate reduce reinvestment rates, while a shared legal origin increases them.</p>","PeriodicalId":46980,"journal":{"name":"Open Economies Review","volume":"22 1","pages":""},"PeriodicalIF":1.5000,"publicationDate":"2024-05-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Open Economies Review","FirstCategoryId":"96","ListUrlMain":"https://doi.org/10.1007/s11079-024-09763-8","RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"ECONOMICS","Score":null,"Total":0}
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Abstract
Profits accruing to foreign-owned firms can either be repatriated to the origin country or reinvested in the host country. Using bilateral country-level FDI earnings flow data, this paper empirically investigates what determines how much is reinvested in a given country. Panel data regressions are estimated on OECD country pairs for the time period 2005-2020 with origin and host country fixed effects. Macroeconomic conditions, institutional factors, agency problems, taxation, and global economic factors are considered as explanatory variables. Lagged independent variables are used as instruments in a 2SLS specification. The main finding is that geographical distance and the world GDP growth rate reduce reinvestment rates, while a shared legal origin increases them.
期刊介绍：
The topics covered in Open Economies Review include, but are not limited to, models and applications of (1) trade flows, (2) commercial policy, (3) adjustment mechanism to external imbalances, (4) exchange rate movements, (5) alternative monetary regimes, (6) real and financial integration, (7) monetary union, (8) economic development and (9) external debt. Open Economies Review welcomes original manuscripts, both theoretical and empirical, dealing with international economic issues or national economic issues that have transnational relevance. Furthermore, Open Economies Review solicits contributions bearing on specific events on important branches of the literature. Open Economies Review is open to any and all contributions, without preferences for any particular viewpoint or school of thought. Open Economies Review encourages interdisciplinary communication and interaction among researchers in the vast area of international and transnational economics. Authors will be expected to meet the scientific standards prevailing in their respective fields, and empirical findings must be reproducible. Regardless of degree of complexity and specificity, authors are expected to write an introduction, setting forth the nature of their research and the significance of their findings, in a manner accessible to researchers in other disciplines. Officially cited as: Open Econ Rev
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