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Competing-Destinations Gravity Model: An Application to the Geographic Distribution of FDI

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Mello-Sampayo, Felipa de

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Abstract The competing-destinations formulation of the gravity model ensues from the fact that unlike the classical version, this approach explicitly acknowledges the interdependence of the flows between a set of alternative locations, i.e. countries-recipients are competing for FDI. This paper examines empirically a range of theoretical hypotheses about the determinants of FDI location in a panel data regression framework. The results of the estimation of a gravity model lend support to the proximity-concentration and internalization hypotheses. Also, the fact that FDI has been found to be decreasing in the competition posed by alternative locations is suggestive of the superiority of the competing-destinations version of the gravity equation over its classical formulation.
Document language English
Publication Year 2009
Page/Pages p. 2237-2253
Journal Applied Economics, 41 (2009) 17
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)