Search results for "Gravity equation"
showing 10 items of 21 documents
Homeward Bound FDI: Are Migrants a Bridge over Trouble Finance?
2016
Migrants can lower cross-border investment barriers, help investors by providing information about their homeland and reduce transaction costs by sharing expertise on regulations, customs and procedures. In addition to generating these well-known networking effects, migrants can also provide valuable information about local finance, thereby easing the credit constraints foreign investors faced during the 2007 financial crisis. This paper sheds new light on the underlying mechanisms through which migration may affect foreign investment in the migrant's homeland by distinguishing between the effects on FDI's intensive and extensive margins. Gravity estimates for 140 countries for the period 2…
Tourism and migration: Identifying the channels with gravity models
2020
As a result of the role played by migrants in supporting host economies, the interest in understanding the impact of migration is growing. However, the literature remains silent on the channels by which migration affects tourism. The present article aims to isolate the effect of migrant networks on tourism by exploring the role of information, travel costs, and demand for visiting friends and relatives. To this end, a theoretical framework that rests upon a structural gravity model is developed. The model allows not only a better understanding of the relationship between tourism and migration but also to overcome several empirical biases like the omission of multilateral resistance in tour…
Cross-Border Higher Education : The Expansion of International Branch Campuses
2022
AbstractThe international expansion of higher education has intensified in recent decades with a rapidly growing number of international branch campuses appearing on the scene. This study investigates the economic, cultural and institutional, and educational determinants of transnational higher education on both the extensive margin (number of international branch campuses), and the intensive margin (the total number of educational programmes offered). Using the gravity equation, we applied fixed-effect empirical methods to a panel dataset that combined and extended the raw data from campuses and master’s programmes in 33 source countries and 76 host countries in the period from 1948 to 201…
The factor content of regional bilateral trade: The role of technology and demand
2011
Abstract The Heckscher–Ohlin–Vanek (HOV) model in its strict form has been strongly rejected by the data. Relaxing some assumptions of the standard HOV model is key to find improvements in its performance. We apply the Davis and Weinstein (2001) methodology to analyse the validity of the HOV model using regions rather than countries. Surprisingly, our results using data for 17 Spanish regions are similar to theirs with international data for OECD countries. Accounting for technological differences improves the predictive capacity of the factor proportions model and including trade costs and geography reduces significantly the missing trade problem. However, relaxing the assumption of factor…
The effect of the great recession on foreign direct investment: global empirical evidence with a gravity approach
2013
This article estimates the effect of the present global systemic banking crisis on foreign direct investment (FDI) using the gravity equation on a sample of 161 countries over the period 2003 to 2010. Systemic banking crises, through demand shocks and credit constraints, may impact FDI in two ways: aggregate monetary flows and individual projects count. Since gravity equations account for output variations, our research relies on the financial constraints channel. We find that the great recession, through credit constraints on home supply markets, has reduced the number of FDI projects, but not their size, forcing investors to become more selective on their international endeavours.
Estimating the gravity equation with the actual number of exporting firms
2013
Para estimar correctamente el efecto de los costes de comerciar sobre las exportaciones de las empresas, la ecuación de gravedad debe controlar por el número de empresas que opera en el mercado internacional. Debido a la ausencia de datos, estudios anteriores han controlado esta variable mediante técnicas econométricas que también pueden generar estimaciones sesgadas. Para superar estos problemas este trabajo estima una ecuación de gravedad utilizando una nueva base de datos de la OCDE y EUROSTAT , que incluye el número de empresas exportadoras en cada relación bilateral. Nuestros resultados muestran que no controlar el margen extensivo genera sesgos muy importantes en la estimación de los …
Quantile regression for the FDI gravity equation
2015
Abstract Firm-level heterogeneity shapes foreign direct investment (FDI) flows, whereby a few firms are responsible for most of the world's FDI. Aggregate outcomes of FDI are highly skewed, and the estimates of FDI's antecedents vary largely depending on FDI level. The incidence of individual firms, however, varies across FDI's quantiles. To study the individual firms' effect on FDI flows, this study develops a quantile regression method for bilateral FDI panel data. This study estimates the differential incidence of individual firm-level projects on aggregate flows among 161 countries from 2003 to 2012. Results suggest that FDI's determinants vary across quantiles. In particular, the effec…
IS THERE A CONTINENTAL BIAS IN TRADE?
2011
The relationship between geography and trade is a central topic in international economics. This paper investigates the potential existence of a continental bias in world trade flows on a sample of 182 countries over the period 1990-2006. Using traditional estimation techniques and recent developments in the econometric analysis of the gravity equation, we find robust evidence of an economically significant continental bias in trade. It implies that, other things equal, countries located on the same continent trade more with each other than countries located on different continents. A continent-by-continent analysis reveals that Oceania, America, Europe and Asia are behind this result. Afri…
''Dual'' gravity: Using spatial econometrics to control for multilateral resistance.
2007
We propose a quantity-based `dual' version of the gravity equation that yields an estimating equation with both cross-sectional interdependence and spatially lagged error terms. Such an equation can be concisely estimated using spatial econometric techniques. We illustrate this methodology by applying it to the Canada-U.S. data set used previously, among others, by Anderson and van Wincoop (2003) and Feenstra (2002, 2004). Our key result is to show that controlling directly for spatial interdependence across trade flows, as suggested by theory, significantly reduces border effects because it captures `multilateral resistance'. Using a spatial autoregressive moving average specification, we …
Are Energy Market Integrations a Green Light for FDI?
2015
This paper studies the effect of energy market integration (EMI) on foreign direct investment (FDI). EMIs diminish energy uncertainty and price volatility in the host country and affect FDI through two channels: first, by harmonizing energy prices and, second, by reducing price dispersion. FDI may, as a result, increase both within and outside the EMI area, through energy stability mechanisms and price mechanisms, respectively. An empirical application on a global dataset including bilateral FDI data, during 2003-2012, using the gravity equation, shows that the integration of Portugal and Spain's electricity market in 2007 increased the amount of FDI's participants. Additionally, a positive…