Kiel Working Papers, Kiel Institute for World Economics
No 1374:
Does Foreign Direct Investment Promote Regional Development in Developed Countries? A Markov Chain Approach for US States
Eckhardt Bode and Peter Nunnenkamp
Abstract: This paper investigates the effects of inward FDI on
per-capita income and growth of the US states since the mid-1970s. Using a
Markov chain approach, it shows that both quantitative and qualitative
characteristics of FDI affect per-capita income and growth.
Employment-intensive FDI, concentrated in richer states, has been conducive
to income growth, while capital-intensive FDI, concentrated in poorer
states, has not. FDI has consequently tended to slow down rather than
foster income convergence among US states. It appears to be less important
whether FDI has been undertaken in the manufacturing sector of US states or
in other sectors.
Keywords: Markov transition probability; likelihood ratio test; FDI; per-capita income; regional development; United States of America; (follow links to similar papers)
JEL-Codes: F23; O18; O51; (follow links to similar papers)
32 pages, August 2007
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