John. A. List

"U.S.  Country-Level Determinants of Inbound FDI: Evidence from a Two-Step Modified Count Data Model"

JEL codes: L13; O31
Keywords: Research Joint Venture; Cost Paradox

Abstract:   We employ a two-step modified count data model to determine the country-level attributes that are conducive to attracting new foreign plants. Our estimation results indicate that previous counts of foreign direct investment, market size and accessibility, and land area are positively related to FDI occurrences; while higher input costs deter new foreign  firm entry. Contrary to anecdotal evidence, our results suggest that stringent environmental regulations do not have a negative impact on FDI inflows. These findings have significant implications for policymakers, as flows of FDI are expected to increase dramatically given the economic   integration of our global economy.