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Journal of Economic Integration 2007 March;22(1) :1-25.
DOI: https://doi.org/10.11130/jei.2007.22.1.1
Global FDI Convergence Patterns?: Evidence from International Comparisons
Constantina Kottaridi and 
Dimitrios D. Thomakos 
University of Peloponnese
Copyright ©2007 Journal of Economic Integration
ABSTRACT

In this paper we examine, for the first time to the best of our knowledge, the issue of convergence in Foreign Direct Investment (FDI) for a sample of countries representative of the world economy. We distinguish between groups of countries so that we can better understand differences attributed to specific developmental stages and different institutional and regional characteristics. The results of our analysis can be seen as an attempt to evaluate the validity of the New Economic Geography (NEG) theory which predicts a "core-periphery" structure of international production at intermediate trade costs. Our econometric methodology utilizes panel unit root tests, which have previously been used in similar studies, but also appropriate dynamic panel regressions to correctly assess the magnitude of the convergence coefficient. Furthermore, we provide a simpler derivation for an equivalent estimable equation to the one used in past convergence studies. Our overall results point toward convergence tendencies, contrary to a "coreperiphery" pattern. We discuss our results in the context of the relevant literature, along with their policy-making implications for transnational, national and regional investment strategies.

JEL classification:F21, F41, R11

Keywords: Convergence | Foreign direct investment | New economic geogrphy
 
REFERENCE
1. Aghion, P. and P. Howitt (1992). A Model of Growth through Creative Destruction, Econometrica, 60(2), 323-51.
2. Arellano, M., and O. Bover (1995). Another Look at the Instrumental Variables Estimation of Error-components Models, Journal of Econometrics, 68, 29-51.
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