The impact of regional investment liberalization on foreign direct investment: A firm-level simulation assessment

Japan and the World Economy, 2016, vol. 37-38, 17-26

Abstract: With the proliferation of regional economic integration, investment liberalization has gained in importance. This paper conducts counterfactual policy experiments to simulate the response of multinational firms to a regional decline in investment costs. We find evidence of investment creation effects at the aggregate level. While there is weak evidence of investment diversion effects, the non-participation in regional integration discourages multinational activity of non-member countries. As less productive firms experience the extensive-margin growth strongly, the effects differ significantly by multinational firms with heterogeneous productivity.

Keywords: Regional integration; Investment liberalization; FDI; Firm heterogeneity; Japan (search for similar items in EconPapers)
JEL-codes: F15 F21 F23 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:japwor:v:37-38:y:2016:i::p:17-26

DOI: 10.1016/j.japwor.2016.02.001

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