Table 1: DATA SOURCE

 

 

 

Variables:

Source:

FDI Flows

International Direct Investment Database (OECD)

GDP

World Economic Indicators

Population

World Economic Indicators

Number of Workers

World Economic Indicators

Distance

Andrew Rose's website: www.haas.berkeley.edu/~arose

Common Language

Andrew Rose's website: www.haas.berkeley.edu/~arose

Education Attainment

Barro-Lee Dataset, http://www.nber.org/pub/barro.lee/

ICRG Index of Financial Risk Rating

PRS Group

Capital Stock

Francesco Caselli’s website: http://personal.lse.ac.uk/casellif

 

 

Table 2: FREQUENCY OF SOURCE-HOST INTERACTIONS BY COUNTRIES

 

 

Country

Source

Host

Country

Source

Host

Algeria

0.02

0.04

Korea

0.45

0.31

Argentina

0.16

0.37

Kuwait

0.04

0.00

Australia

0.24

0.32

Libya

0.02

0.02

Austria

0.42

0.19

Malaysia

0.17

0.32

Belgium

0.00

0.00

Mexico

0.05

0.38

Brazil

0.18

0.37

Morocco

0.07

0.17

Bulgaria

0.06

0.19

Netherlands

0.52

0.34

Canada

0.22

0.23

Netherlands Antilles

0.07

0.03

Chile

0.07

0.32

New Zealand

0.16

0.19

China

0.24

0.40

Norway

0.28

0.19

Chinese Taipei

0.24

0.29

Panama

0.06

0.06

Colombia

0.08

0.18

Philippines

0.10

0.31

Costa Rica

0.03

0.02

Poland

0.12

0.30

Czech Republic

0.06

0.16

Portugal

0.25

0.30

Czechoslovakia

0.02

0.02

Romania

0.07

0.20

Denmark

0.36

0.23

Russia

0.15

0.27

Egypt

0.06

0.21

Saudi Arabia

0.07

0.06

Finland

0.38

0.18

Singapore

0.29

0.37

France

0.75

0.62

Slovak Republic

0.02

0.08

Germany

0.65

0.47

Slovenia

0.05

0.12

Greece

0.07

0.17

South Africa

0.15

0.24

Hong Kong (China)

0.34

0.37

Spain

0.49

0.47

Hungary

0.08

0.20

Sweden

0.42

0.28

Iceland

0.14

0.09

Switzerland

0.46

0.22

India

0.15

0.36

Thailand

0.10

0.35

Indonesia

0.12

0.30

Turkey

0.10

0.20

Iran

0.10

0.07

Ukraine

0.05

0.13

Ireland

0.20

0.24

United Arab Emirates

0.03

0.04

Israel

0.24

0.22

United Kingdom

0.60

0.41

Italy

0.52

0.36

United States

0.63

0.47

Japan

0.64

0.32

Venezuela

0.13

0.21

 

 

Table 3: Bilateral FDI Flows and Selection Equations

(Observations on Non-OECD to Non-OECD FDI are excluded)

 

 

Panel A

Panel B

 

Flow

Selection

Flow

Selection

Host-Output per worker

0.037

-0.026

 

 

 

(0.012)**

(0.010)**

 

 

Host-Instrumented output per worker

 

 

-0.020

-0.038

 

 

 

(0.016)

(0.012)**

Source-Output per worker

0.002

-0.025

 

 

 

(0.014)

(0.009)**

 

 

Source-Instrumented output per worker

 

 

-0.078

-0.023

 

 

 

(0.016)**

(0.013)

 

 

 

 

 

GDP per capita - host^

1.373

0.345

2.192

0.163

 

(0.345)**

(0.250)

(0.289)**

(0.218)

GDP per capita - source^

1.839

0.609

2.181

0.326

 

(0.431)**

(0.276)*

(0.339)**

(0.226)

Difference between schooling (source – host)

0.038

-0.097

0.058

-0.106

 

(0.042)

(0.032)**

(0.044)

(0.034)**

Common language

0.728

0.323

0.727

0.321

 

(0.066)**

(0.055)**

(0.066)**

(0.055)**

Distance (in Logs)

-0.982

-0.534

-0.984

-0.535

 

(0.027)**

(0.030)**

(0.027)**

(0.030)**

Population-host^

-1.536

-0.483

-1.687

-0.303

 

(0.771)*

(0.613)

(0.773)*

(0.606)

Population-source^

-1.332

0.708

-1.411

1.014

 

(0.912)

(0.649)

(0.909)

(0.642)

Financial risk rating - source

0.003

0.001

-0.001

0.002

 

(0.007)

(0.005)

(0.007)

(0.005)

Financial risk rating - host

0.018

0.013

0.011

0.011

 

(0.006)**

(0.005)**

(0.006)

(0.005)*

FDI flows from i to j a year ago ( =1 if yes)

 

1.599

 

1.602

 

 

(0.038)**

 

(0.038)**

Correlation (Ui,j, Vi,j)

-0.064

 

-0.059

 

 

(0.028)*

 

(0.028)*

 

Inverse Mills ratio

-0.092

 

-0.084

 

 

(0.041)*

 

(0.040)*

 

Observations

17656

 

 

 

Censored observations

10906

 

 

 

Uncensored observations

 

6750

 

 

 

 

Note: ^ in logs; Country and time fixed effects are included; Robust standard errors in parentheses;

* significant at 5%; ** significant at 1%

 

Table 4: Bilateral FDI Flows and Selection Equations

(Observations on Non-OECD to Non-OECD FDI are excluded;

Two-year smoothing)

 

 

Panel A

Panel B

 

Flow

Selection

Flow

Selection

Host-Output per worker

0.032

-0.004

 

 

 

(0.015)**

(0.012)

 

 

Host-Instrumented output per worker

 

 

-0.032

-0.021

 

 

 

(0.020)

(0.018)

Source-Output per worker

-0.007

-0.018

 

 

 

(0.016)

(0.012)

 

 

Source-Instrumented output per worker

 

 

-0.101

-0.015

 

 

 

(0.020)**

(0.018)

 

 

 

 

 

GDP per capita - host^

1.371

0.216

2.234

0.260

 

(0.473)**

(0.367)

(0.380)**

(0.307)

GDP per capita - source^

1.595

0.291

1.771

0.041

 

(0.509)**

(0.404)

(0.396)**

(0.321)

Difference between schooling (source – host)

0.024

-0.081

0.045

-0.084

 

(0.053)

(0.044)

(0.055)

(0.046)

Common language

0.778

0.299

0.779

0.298

 

(0.081)**

(0.072)**

(0.081)**

(0.072)**

Distance (in Logs)

-1.042

-0.591

-1.046

-0.592

 

(0.034)**

(0.042)**

(0.034)**

(0.042)**

Population-host^

-0.830

-1.721

-0.750

-1.729

 

(0.944)

(0.858)*

(0.948)

(0.853)*

Population-source^

0.375

-0.588

0.516

-0.359

 

(1.096)

(0.847)

(1.097)

(0.850)

Financial risk rating - source

-0.009

-0.006

-0.015

-0.005

 

(0.009)

(0.007)

(0.009)

(0.007)

Financial risk rating - host

0.013

0.014

0.004

0.012

 

(0.008)

(0.007)*

(0.008)

(0.007)

FDI flows from i to j a year ago ( =1 if yes)

 

1.405

 

1.406

 

 

(0.050)**

 

(0.050)**

Correlation (Ui,j, Vi,j)

-0.061

 

-0.056

 

 

(0.034)

 

(0.034)

 

Inverse Mills ratio

-0.085

 

-0.079

 

 

(0.048)

 

(0.047)

 

Observations

9689

 

 

 

Censored observations

5410

 

 

 

Uncensored observations

 

4279

 

 

 

 

Note: ^ in logs; Country and time fixed effects are included; Robust standard errors in parentheses;

* significant at 5%; ** significant at 1%

 

 

Table 5: Bilateral FDI Flows and Selection Equations

(Observations on Non-OECD to Non-OECD FDI are included)

 

 

Panel A

Panel B

 

Flow

Selection

Flow

Selection

Host-Output per worker

0.037

-0.026

 

 

 

(0.012)**

(0.009)**

 

 

Host-Instrumented output per worker

 

 

-0.019

-0.040

 

 

 

(0.016)

(0.012)**

Source-Output per worker

0.001

-0.023

 

 

 

(0.014)

(0.009)**

 

 

Source-Instrumented output per worker

 

 

-0.078

-0.025

 

 

 

(0.016)**

(0.012)*

 

 

 

 

 

GDP per capita - host^

1.374

0.277

2.193

0.126

 

(0.345)**

(0.228)

(0.289)**

(0.204)

GDP per capita - source^

1.845

0.527

2.185

0.312

 

(0.431)**

(0.257)*

(0.339)**

(0.214)

Difference between schooling (source – host)

0.037

-0.091

0.058

-0.098

 

(0.042)

(0.031)**

(0.044)

(0.033)**

Common language

0.730

0.294

0.729

0.291

 

(0.066)**

(0.051)**

(0.066)**

(0.051)**

Distance (in Logs)

-0.986

-0.385

-0.988

-0.387

 

(0.027)**

(0.023)**

(0.027)**

(0.024)**

Population-host^

-1.549

-0.733

-1.698

-0.512

 

(0.771)*

(0.558)

(0.773)*

(0.554)

Population-source^

-1.316

0.385

-1.395

0.709

 

(0.912)

(0.599)

(0.909)

(0.595)

Financial risk rating - source

0.003

0.000

-0.001

0.000

 

(0.007)

(0.005)

(0.007)

(0.005)

Financial risk rating - host

0.018

0.009

0.011

0.008

 

(0.006)**

(0.005)

(0.006)

(0.005)

FDI flows from i to j a year ago ( =1 if yes)

 

1.691

 

1.694

 

 

(0.037)**

 

(0.037)**

Correlation (Ui,j, Vi,j)

-0.058

 

-0.052

 

 

(0.027)*

 

(0.027)

 

Inverse Mills ratio

-0.083

 

-0.075

 

 

(0.039)*

 

(0.039)

 

Observations

21406

 

 

 

Censored observations

14656

 

 

 

Uncensored observations

 

6750

 

 

 

 

Note: ^ in logs; Country and time fixed effects are included; Robust standard errors in parentheses

* significant at 5%; ** significant at 1%

 

Table 6: Bilateral FDI Flows and Selection Equations

(Observations on Non-OECD to Non-OECD FDI are included;

 Two-year smoothing)

 

 

Panel A

Panel B

 

Flow

Selection

Flow

Selection

Host-Output per worker

0.032

-0.004

 

 

 

(0.015)**

(0.012)

 

 

Host-Instrumented output per worker

 

 

-0.032

-0.018

 

 

 

(0.020)

(0.017)

Source-Output per worker

-0.007

-0.014

 

 

 

(0.016)

(0.011)

 

 

Source-Instrumented output per worker

 

 

-0.101

-0.018

 

 

 

(0.020)**

(0.017)

 

 

 

 

 

GDP per capita - host^

1.369

0.103

2.233

0.155

 

(0.473)**

(0.329)

(0.380)**

(0.285)

GDP per capita - source^

1.602

0.194

1.773

0.062

 

(0.509)**

(0.371)

(0.396)**

(0.301)

Difference between schooling (source – host)

0.024

-0.069

0.045

-0.069

 

(0.053)

(0.041)

(0.055)

(0.044)

Common language

0.781

0.257

0.781

0.256

 

(0.081)**

(0.066)**

(0.081)**

(0.066)**

Distance (in Logs)

-1.047

-0.398

-1.050

-0.399

 

(0.034)**

(0.031)**

(0.034)**

(0.031)**

Population-host^

-0.851

-2.409

-0.767

-2.354

 

(0.940)

(0.781)**

(0.944)

(0.784)**

Population-source^

0.385

-0.791

0.527

-0.566

 

(1.096)

(0.776)

(1.096)

(0.786)

Financial risk rating - source

-0.009

-0.007

-0.015

-0.007

 

(0.009)

(0.007)

(0.009)

(0.007)

Financial risk rating - host

0.013

0.014

0.004

0.012

 

(0.008)

(0.006)*

(0.008)

(0.007)

FDI flows from i to j a year ago ( =1 if yes)

 

1.517

 

1.518

 

 

(0.049)**

 

(0.049)**

Correlation (Ui,j, Vi,j)

-0.050

 

-0.045

 

 

(0.033)

 

(0.033)

 

Inverse Mills ratio

-0.071

 

-0.063

 

 

(0.047)

 

(0.046)

 

Observations

11828

 

 

 

Censored observations

7549

 

 

 

Uncensored observations

 

4279

 

 

 

 

Note: ^ in logs; Country and time fixed effects are included; Robust standard errors in parentheses

* significant at 5%; ** significant at 1%

 

 

Table 7: The Instrumented Productivity Equation

 

Capital over labor ratio

 

 

2.33

(0.09)**

 

Years of schooling

 

 

0.66

(0.19)**

 

Observations

 

879

 

R-squared

 

0.99

 

Note: Country and time fixed effects are included;

Standard errors in parentheses; ** significant at 1%