Davies, Ronald B.

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https://hdl.handle.net/1794/3688

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Browsing Davies, Ronald B. by Author "Kristjánsdóttir, Helga"

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    Estimating the Impact of Time-Invariant Variables on FDI with Fixed Effects
    (University of Oregon, Dept of Economics, 2007-05) Davies, Ronald B.; Ionascu, Delia; Kristjánsdóttir, Helga
    This paper applies the panel fixed effects with vector decomposition estimator to 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.
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    Fixed Costs, Foreign Direct Investment, and Gravity with Zeros
    (University of Oregon, Dept of Economics, 2006-06) Davies, Ronald B.; Kristjánsdóttir, Helga
    Fixed costs play a crucial role in current models of foreign direct investment (FDI), yet they are almost entirely ignored in empirical treatments of FDI. We fill this gap by using a 1989-2001 panel of FDI flows into Iceland to examine the determinants of fixed costs for multinational firms and how these influence aggregate patterns of investment. Our additions to research in the field include usage of several natural resource variables, and the analysis of data on initial entry of FDI into a developed country. We use Heckman two step procedure, which allows us to account for fixed costs and their impact on estimation. Taken together, we find that the standard OLS approach to the data incorrectly links the quantity of FDI to source country variables while in fact most of their role is in determining whether FDI takes place at all.