Kiel Working Papers, Kiel Institute for World Economics
No 1628:
The Location Choices of Foreign Investors: A District-level Analysis in India
Megha Mukim and Peter Nunnenkamp
Abstract: This paper analyzes the determinants of the location
choices made by foreign investors at the district level in India to gauge
the relative importance of economic geography factors, local business
conditions, and the presence of previous foreign investors. We employ a
discrete-choice model and Poisson regressions to control for the potential
violation of the assumption of Independence of Irrelevant Alternatives. Our
sample includes about 19,500 foreign investment projects approved in 447
districts from 1991-2005. We find that foreign investors strongly prefer
locations where other foreign investors are. They are also attracted to
industrially diverse locations and those with better infrastructure. We
conclude that the concentration of FDI in a few locations could fuel
regional divergence in post-reform India
Keywords: FDI, economic geography, location choice, infrastructure; (follow links to similar papers)
JEL-Codes: F23,; R12; (follow links to similar papers)
38 pages, June 2010
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