FDI nance under credit constraints: Does greeneld FDI follow reinvestment? S. Gil-Pareja

FDI nance under credit constraints:
Does greeneld FDI follow reinvestment?
S. Gil-Parejaa
R. Llorca-Viveroa J. Paniaguab 1
a University of Valencia
b Catholic University of Valencia
XI INTECO Workshop on Economic Integration, 2014
1 [email protected]
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
1 / 22
Motivation
Example
Valencia's Fiesta
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
2 / 22
Motivation
Example
Valencia's Fiesta
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
2 / 22
Motivation
Example
Valencia's Fiesta
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
2 / 22
Motivation
Example
Valencia's Fiesta
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
2 / 22
Motivation
Example
Ford in Valencia
In June 2011, Ford announced its biggest reinvestment (¿812 million
or $1.2 billion) in the Spanish plant since 35 years (Reuters, 2011).
Two years later, in May 2013, the Spanish plant nally received 72%
of the planned investment (Euro Weekly News, 2013).
The Spanish Registry for FDI accounted an 86% increase of new
foreign investment in automobile manufactures during that period
(excluding Ford's).
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
3 / 22
Motivation
Example
Ford in Valencia
In June 2011, Ford announced its biggest reinvestment (¿812 million
or $1.2 billion) in the Spanish plant since 35 years (Reuters, 2011).
Two years later, in May 2013, the Spanish plant nally received 72%
of the planned investment (Euro Weekly News, 2013).
The Spanish Registry for FDI accounted an 86% increase of new
foreign investment in automobile manufactures during that period
(excluding Ford's).
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
3 / 22
Motivation
Example
Ford in Valencia
In June 2011, Ford announced its biggest reinvestment (¿812 million
or $1.2 billion) in the Spanish plant since 35 years (Reuters, 2011).
Two years later, in May 2013, the Spanish plant nally received 72%
of the planned investment (Euro Weekly News, 2013).
The Spanish Registry for FDI accounted an 86% increase of new
foreign investment in automobile manufactures during that period
(excluding Ford's).
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
3 / 22
Outline
1
2
3
4
5
Motivation
Example
Contributions
Stylized facts on Reinvestment
Questions
The model
Domestic production
Foreign production
Emprical Strategy
Results
OLS & PPML
Quantile Regressions
Conclusions
Motivation
Contributions
This paper
1
Derives a gravity equation for FDI with credit constraints
gives theoretical substance to previous empirical ndings (Gil-Pareja et
al., 2013)
2
Incorporates incomplete contracts (Nunn, 2007) to a Melitz (2003)
world
explains FDI nance (Buch et al., 2014)
3
Explains how reinvestment spills over to greeneld
through the nancial Channel
4
Provides empirical evidence suggesting that settled investors
Increase Greeneld FDI
Oset credit constraints at home
Oset distance costs
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
5 / 22
Motivation
Contributions
This paper
1
Derives a gravity equation for FDI with credit constraints
gives theoretical substance to previous empirical ndings (Gil-Pareja et
al., 2013)
2
Incorporates incomplete contracts (Nunn, 2007) to a Melitz (2003)
world
explains FDI nance (Buch et al., 2014)
3
Explains how reinvestment spills over to greeneld
through the nancial Channel
4
Provides empirical evidence suggesting that settled investors
Increase Greeneld FDI
Oset credit constraints at home
Oset distance costs
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
5 / 22
Motivation
Contributions
This paper
1
Derives a gravity equation for FDI with credit constraints
gives theoretical substance to previous empirical ndings (Gil-Pareja et
al., 2013)
2
Incorporates incomplete contracts (Nunn, 2007) to a Melitz (2003)
world
explains FDI nance (Buch et al., 2014)
3
Explains how reinvestment spills over to greeneld
through the nancial Channel
4
Provides empirical evidence suggesting that settled investors
Increase Greeneld FDI
Oset credit constraints at home
Oset distance costs
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
5 / 22
Motivation
Contributions
This paper
1
Derives a gravity equation for FDI with credit constraints
gives theoretical substance to previous empirical ndings (Gil-Pareja et
al., 2013)
2
Incorporates incomplete contracts (Nunn, 2007) to a Melitz (2003)
world
explains FDI nance (Buch et al., 2014)
3
Explains how reinvestment spills over to greeneld
through the nancial Channel
4
Provides empirical evidence suggesting that settled investors
Increase Greeneld FDI
Oset credit constraints at home
Oset distance costs
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
5 / 22
Motivation
Contributions
This paper
1
Derives a gravity equation for FDI with credit constraints
gives theoretical substance to previous empirical ndings (Gil-Pareja et
al., 2013)
2
Incorporates incomplete contracts (Nunn, 2007) to a Melitz (2003)
world
explains FDI nance (Buch et al., 2014)
3
Explains how reinvestment spills over to greeneld
through the nancial Channel
4
Provides empirical evidence suggesting that settled investors
Increase Greeneld FDI
Oset credit constraints at home
Oset distance costs
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
5 / 22
Motivation
Contributions
This paper
1
Derives a gravity equation for FDI with credit constraints
gives theoretical substance to previous empirical ndings (Gil-Pareja et
al., 2013)
2
Incorporates incomplete contracts (Nunn, 2007) to a Melitz (2003)
world
explains FDI nance (Buch et al., 2014)
3
Explains how reinvestment spills over to greeneld
through the nancial Channel
4
Provides empirical evidence suggesting that settled investors
Increase Greeneld FDI
Oset credit constraints at home
Oset distance costs
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
5 / 22
Motivation
Contributions
This paper
1
Derives a gravity equation for FDI with credit constraints
gives theoretical substance to previous empirical ndings (Gil-Pareja et
al., 2013)
2
Incorporates incomplete contracts (Nunn, 2007) to a Melitz (2003)
world
explains FDI nance (Buch et al., 2014)
3
Explains how reinvestment spills over to greeneld
through the nancial Channel
4
Provides empirical evidence suggesting that settled investors
Increase Greeneld FDI
Oset credit constraints at home
Oset distance costs
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
5 / 22
Motivation
Contributions
This paper
1
Derives a gravity equation for FDI with credit constraints
gives theoretical substance to previous empirical ndings (Gil-Pareja et
al., 2013)
2
Incorporates incomplete contracts (Nunn, 2007) to a Melitz (2003)
world
explains FDI nance (Buch et al., 2014)
3
Explains how reinvestment spills over to greeneld
through the nancial Channel
4
Provides empirical evidence suggesting that settled investors
Increase Greeneld FDI
Oset credit constraints at home
Oset distance costs
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
5 / 22
Motivation
Contributions
This paper
1
Derives a gravity equation for FDI with credit constraints
gives theoretical substance to previous empirical ndings (Gil-Pareja et
al., 2013)
2
Incorporates incomplete contracts (Nunn, 2007) to a Melitz (2003)
world
explains FDI nance (Buch et al., 2014)
3
Explains how reinvestment spills over to greeneld
through the nancial Channel
4
Provides empirical evidence suggesting that settled investors
Increase Greeneld FDI
Oset credit constraints at home
Oset distance costs
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
5 / 22
Motivation
Contributions
This paper
1
Derives a gravity equation for FDI with credit constraints
gives theoretical substance to previous empirical ndings (Gil-Pareja et
al., 2013)
2
Incorporates incomplete contracts (Nunn, 2007) to a Melitz (2003)
world
explains FDI nance (Buch et al., 2014)
3
Explains how reinvestment spills over to greeneld
through the nancial Channel
4
Provides empirical evidence suggesting that settled investors
Increase Greeneld FDI
Oset credit constraints at home
Oset distance costs
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
5 / 22
Motivation
Stylized facts
Global FDI ows (and projections)
Source: World Investment Report (WIR), 2013
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
6 / 22
Motivation
Stylized facts
FDI types
Fact 1
Greeneld projects represent a
signicant share of FDI outows
(WIR, 2013)
Fact 2
Greeneld projects decreased during
the crisis (Gil-Pareja et al., 2013)
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
7 / 22
Motivation
Stylized facts
FDI types
Fact 1
Greeneld projects represent a
signicant share of FDI outows
(WIR, 2013)
Fact 2
Greeneld projects decreased during
the crisis (Gil-Pareja et al., 2013)
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
7 / 22
Motivation
Stylized facts
FDI types
Fact 1
Greeneld projects represent a
signicant share of FDI outows
(WIR, 2013)
Fact 2
Greeneld projects decreased during
the crisis (Gil-Pareja et al., 2013)
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
7 / 22
Motivation
Stylized facts
Reinvestment
Fact 3
Reinvestment in settled aliates
represent are signicant (WIR, 2013)
Fact 4
Reinvestment are also aected by
credit constraints (Gil-Pareja et al.,
2013)
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
8 / 22
Motivation
Stylized facts
Reinvestment
Fact 3
Reinvestment in settled aliates
represent are signicant (WIR, 2013)
Fact 4
Reinvestment are also aected by
credit constraints (Gil-Pareja et al.,
2013)
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
8 / 22
Motivation
Stylized facts
Reinvestment
Fact 3
Reinvestment in settled aliates
represent are signicant (WIR, 2013)
Fact 4
Reinvestment are also aected by
credit constraints (Gil-Pareja et al.,
2013)
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
8 / 22
Motivation
Stylized facts
Take Away
Greeneld projects represent a signicant intake of the world's FDI
There are several types of FDI projects (new, expansion, co-location)
Reinvestment through expansion of foreign production is common
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
9 / 22
Motivation
Stylized facts
Take Away
Greeneld projects represent a signicant intake of the world's FDI
There are several types of FDI projects (new, expansion, co-location)
Reinvestment through expansion of foreign production is common
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
9 / 22
Motivation
Stylized facts
Take Away
Greeneld projects represent a signicant intake of the world's FDI
There are several types of FDI projects (new, expansion, co-location)
Reinvestment through expansion of foreign production is common
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
9 / 22
Motivation
Questions
Some questions
Do reinvestment in settled aliates spill over to new entreats?
Empirical evidence suggests that foreign investment spills over to other
rms (Blomström and Kokko, 1998)
Do footprints oset foreign establishment costs (e.g., distance)?
Through which channel?
Are settled aliates an alternative credit source?
Can greeneld projects hedge credit constraints?
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
10 / 22
Motivation
Questions
Some questions
Do reinvestment in settled aliates spill over to new entreats?
Empirical evidence suggests that foreign investment spills over to other
rms (Blomström and Kokko, 1998)
Do footprints oset foreign establishment costs (e.g., distance)?
Through which channel?
Are settled aliates an alternative credit source?
Can greeneld projects hedge credit constraints?
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
10 / 22
Motivation
Questions
Some questions
Do reinvestment in settled aliates spill over to new entreats?
Empirical evidence suggests that foreign investment spills over to other
rms (Blomström and Kokko, 1998)
Do footprints oset foreign establishment costs (e.g., distance)?
Through which channel?
Are settled aliates an alternative credit source?
Can greeneld projects hedge credit constraints?
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
10 / 22
Motivation
Questions
Some questions
Do reinvestment in settled aliates spill over to new entreats?
Empirical evidence suggests that foreign investment spills over to other
rms (Blomström and Kokko, 1998)
Do footprints oset foreign establishment costs (e.g., distance)?
Through which channel?
Are settled aliates an alternative credit source?
Can greeneld projects hedge credit constraints?
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
10 / 22
Motivation
Questions
Some questions
Do reinvestment in settled aliates spill over to new entreats?
Empirical evidence suggests that foreign investment spills over to other
rms (Blomström and Kokko, 1998)
Do footprints oset foreign establishment costs (e.g., distance)?
Through which channel?
Are settled aliates an alternative credit source?
Can greeneld projects hedge credit constraints?
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
10 / 22
Motivation
Questions
Some questions
Do reinvestment in settled aliates spill over to new entreats?
Empirical evidence suggests that foreign investment spills over to other
rms (Blomström and Kokko, 1998)
Do footprints oset foreign establishment costs (e.g., distance)?
Through which channel?
Are settled aliates an alternative credit source?
Can greeneld projects hedge credit constraints?
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
10 / 22
The model
Domestic production
The setup
A rm k from country i uses capital to produce goods
The rm procures capital through negotiation with domestic banks
with two costs:
searching and information nancial costs c and
capital costs related to interest rates (r + 1)
ik
i
Limited commitment between the rm and the bank: incomplete
contracts (Nunn, 2007)
Domestic Production
K
max πki = pi θk ( )µ − cik (ri + 1) (γi + (1 − γi ) δ ) K − fi ,
K
µ
∗
ik = µ
K
θk pi
cik (γi + (1 − γi ) δ ) (ri + 1)
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
1/(1-µ)
INTECO 2014
11 / 22
The model
Domestic production
The setup
A rm k from country i uses capital to produce goods
The rm procures capital through negotiation with domestic banks
with two costs:
searching and information nancial costs c and
capital costs related to interest rates (r + 1)
ik
i
Limited commitment between the rm and the bank: incomplete
contracts (Nunn, 2007)
Domestic Production
K
max πki = pi θk ( )µ − cik (ri + 1) (γi + (1 − γi ) δ ) K − fi ,
K
µ
∗
ik = µ
K
θk pi
cik (γi + (1 − γi ) δ ) (ri + 1)
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
1/(1-µ)
INTECO 2014
11 / 22
The model
Domestic production
The setup
A rm k from country i uses capital to produce goods
The rm procures capital through negotiation with domestic banks
with two costs:
searching and information nancial costs c and
capital costs related to interest rates (r + 1)
ik
i
Limited commitment between the rm and the bank: incomplete
contracts (Nunn, 2007)
Domestic Production
K
max πki = pi θk ( )µ − cik (ri + 1) (γi + (1 − γi ) δ ) K − fi ,
K
µ
∗
ik = µ
K
θk pi
cik (γi + (1 − γi ) δ ) (ri + 1)
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
1/(1-µ)
INTECO 2014
11 / 22
The model
Domestic production
The setup
A rm k from country i uses capital to produce goods
The rm procures capital through negotiation with domestic banks
with two costs:
searching and information nancial costs c and
capital costs related to interest rates (r + 1)
ik
i
Limited commitment between the rm and the bank: incomplete
contracts (Nunn, 2007)
Domestic Production
K
max πki = pi θk ( )µ − cik (ri + 1) (γi + (1 − γi ) δ ) K − fi ,
K
µ
∗
ik = µ
K
θk pi
cik (γi + (1 − γi ) δ ) (ri + 1)
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
1/(1-µ)
INTECO 2014
11 / 22
The model
Domestic production
The setup
A rm k from country i uses capital to produce goods
The rm procures capital through negotiation with domestic banks
with two costs:
searching and information nancial costs c and
capital costs related to interest rates (r + 1)
ik
i
Limited commitment between the rm and the bank: incomplete
contracts (Nunn, 2007)
Domestic Production
K
max πki = pi θk ( )µ − cik (ri + 1) (γi + (1 − γi ) δ ) K − fi ,
K
µ
∗
ik = µ
K
θk pi
cik (γi + (1 − γi ) δ ) (ri + 1)
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
1/(1-µ)
INTECO 2014
11 / 22
The model
Domestic production
The setup
A rm k from country i uses capital to produce goods
The rm procures capital through negotiation with domestic banks
with two costs:
searching and information nancial costs c and
capital costs related to interest rates (r + 1)
ik
i
Limited commitment between the rm and the bank: incomplete
contracts (Nunn, 2007)
Domestic Production
K
max πki = pi θk ( )µ − cik (ri + 1) (γi + (1 − γi ) δ ) K − fi ,
K
µ
∗
ik = µ
K
θk pi
cik (γi + (1 − γi ) δ ) (ri + 1)
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
1/(1-µ)
INTECO 2014
11 / 22
The model
Foreign production
Standalone Foreign Production
The rm uses local banks and transfers the capital abroad
K
max πkj = pj θk ( )µ − cik Dij (ri + 1) (γi + (1 − γi ) δ ) K − fj
K
µ
FDI condition
The rm compares domestic and foreign benets:
θk (pj − pi ) > (γi + (1 − γi ) δ ) (Dij − 1)
Foreign Production à la Melitz (2003)
(
∗
ijk =
K
1/(1-µ)
Θ p
µ c (ri ik+1j)Dij
if Θik > Θ∗ik
ik
0
otherwise.
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
12 / 22
The model
Foreign production
Standalone Foreign Production
The rm uses local banks and transfers the capital abroad
K
max πkj = pj θk ( )µ − cik Dij (ri + 1) (γi + (1 − γi ) δ ) K − fj
K
µ
FDI condition
The rm compares domestic and foreign benets:
θk (pj − pi ) > (γi + (1 − γi ) δ ) (Dij − 1)
Foreign Production à la Melitz (2003)
(
∗
ijk =
K
1/(1-µ)
Θ p
µ c (ri ik+1j)Dij
if Θik > Θ∗ik
ik
0
otherwise.
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
12 / 22
The model
Foreign production
Standalone Foreign Production
The rm uses local banks and transfers the capital abroad
K
max πkj = pj θk ( )µ − cik Dij (ri + 1) (γi + (1 − γi ) δ ) K − fj
K
µ
FDI condition
The rm compares domestic and foreign benets:
θk (pj − pi ) > (γi + (1 − γi ) δ ) (Dij − 1)
Foreign Production à la Melitz (2003)
(
∗
ijk =
K
1/(1-µ)
Θ p
µ c (ri ik+1j)Dij
if Θik > Θ∗ik
ik
0
otherwise.
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
12 / 22
The model
Foreign production
Reinvestment
Settled aliate z negotiates with local (foreign) bank at j.
∗
jz = µ
K
θz p j
cjz (γj + (1 − γj ) δ ) (rj + 1)
1/(1-µ)
With some help of my friends
K
max πkj = pj θk ( )µ − c (z )ijk (rj + 1) (γj + (1 − γj ) δ ) K − fj
K
µ
FDI Condition:
Θjk
Θik
c (z ) (r +1)
j
> c ijk
ik (ri +1)
Firms seek foreign credit when the nancial productivity ratio exceeds
the nancial costs ratio.
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
13 / 22
The model
Foreign production
Reinvestment
Settled aliate z negotiates with local (foreign) bank at j.
∗
jz = µ
K
θz p j
cjz (γj + (1 − γj ) δ ) (rj + 1)
1/(1-µ)
With some help of my friends
K
max πkj = pj θk ( )µ − c (z )ijk (rj + 1) (γj + (1 − γj ) δ ) K − fj
K
µ
FDI Condition:
Θjk
Θik
c (z ) (r +1)
j
> c ijk
ik (ri +1)
Firms seek foreign credit when the nancial productivity ratio exceeds
the nancial costs ratio.
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
13 / 22
The model
Foreign production
Reinvestment
Settled aliate z negotiates with local (foreign) bank at j.
∗
jz = µ
K
θz p j
cjz (γj + (1 − γj ) δ ) (rj + 1)
1/(1-µ)
With some help of my friends
K
max πkj = pj θk ( )µ − c (z )ijk (rj + 1) (γj + (1 − γj ) δ ) K − fj
K
µ
FDI Condition:
Θjk
Θik
c (z ) (r +1)
j
> c ijk
ik (ri +1)
Firms seek foreign credit when the nancial productivity ratio exceeds
the nancial costs ratio.
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
13 / 22
The model
Foreign production
Greeneld FDI with reivestment
 1/(1-µ)

Θik pj (γi +(1−γi )δ )


if Θ∗jk 0 > Θik > Θ∗ik

 µ c (z )ijk (γj +(1−γj )δ )(rj +1)
∗
1/(1-µ)
Kijk =
Θik pj

µ
if Θik > Θ∗jk 0 > Θ∗ik

cik (ri +1)Dij



0
otherwise
The reinvestment footprint of foreign aliates:
1
Reduces nancial costs
1
2
3
Reduces the negative impact of distance
Osets the impact of systemic banking crises at home (i)
Limited by credit constraints at the host country (j)
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
14 / 22
The model
Foreign production
Greeneld FDI with reivestment
 1/(1-µ)

Θik pj (γi +(1−γi )δ )


if Θ∗jk 0 > Θik > Θ∗ik

 µ c (z )ijk (γj +(1−γj )δ )(rj +1)
∗
1/(1-µ)
Kijk =
Θik pj

µ
if Θik > Θ∗jk 0 > Θ∗ik

cik (ri +1)Dij



0
otherwise
The reinvestment footprint of foreign aliates:
1
Reduces nancial costs
1
2
3
Reduces the negative impact of distance
Osets the impact of systemic banking crises at home (i)
Limited by credit constraints at the host country (j)
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
14 / 22
The model
Foreign production
Greeneld FDI with reivestment
 1/(1-µ)

Θik pj (γi +(1−γi )δ )


if Θ∗jk 0 > Θik > Θ∗ik

 µ c (z )ijk (γj +(1−γj )δ )(rj +1)
∗
1/(1-µ)
Kijk =
Θik pj

µ
if Θik > Θ∗jk 0 > Θ∗ik

cik (ri +1)Dij



0
otherwise
The reinvestment footprint of foreign aliates:
1
Reduces nancial costs
1
2
3
Reduces the negative impact of distance
Osets the impact of systemic banking crises at home (i)
Limited by credit constraints at the host country (j)
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
14 / 22
The model
Foreign production
Greeneld FDI with reivestment
 1/(1-µ)

Θik pj (γi +(1−γi )δ )


if Θ∗jk 0 > Θik > Θ∗ik

 µ c (z )ijk (γj +(1−γj )δ )(rj +1)
∗
1/(1-µ)
Kijk =
Θik pj

µ
if Θik > Θ∗jk 0 > Θ∗ik

cik (ri +1)Dij



0
otherwise
The reinvestment footprint of foreign aliates:
1
Reduces nancial costs
1
2
3
Reduces the negative impact of distance
Osets the impact of systemic banking crises at home (i)
Limited by credit constraints at the host country (j)
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
14 / 22
The model
Foreign production
Greeneld FDI with reivestment
 1/(1-µ)

Θik pj (γi +(1−γi )δ )


if Θ∗jk 0 > Θik > Θ∗ik

 µ c (z )ijk (γj +(1−γj )δ )(rj +1)
∗
1/(1-µ)
Kijk =
Θik pj

µ
if Θik > Θ∗jk 0 > Θ∗ik

cik (ri +1)Dij



0
otherwise
The reinvestment footprint of foreign aliates:
1
Reduces nancial costs
1
2
3
Reduces the negative impact of distance
Osets the impact of systemic banking crises at home (i)
Limited by credit constraints at the host country (j)
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
14 / 22
The model
Foreign production
Greeneld FDI with reivestment
 1/(1-µ)

Θik pj (γi +(1−γi )δ )


if Θ∗jk 0 > Θik > Θ∗ik

 µ c (z )ijk (γj +(1−γj )δ )(rj +1)
∗
1/(1-µ)
Kijk =
Θik pj

µ
if Θik > Θ∗jk 0 > Θ∗ik

cik (ri +1)Dij



0
otherwise
The reinvestment footprint of foreign aliates:
1
Reduces nancial costs
1
2
3
Reduces the negative impact of distance
Osets the impact of systemic banking crises at home (i)
Limited by credit constraints at the host country (j)
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
14 / 22
The model
Foreign production
Greeneld FDI with reivestment
 1/(1-µ)

Θik pj (γi +(1−γi )δ )


if Θ∗jk 0 > Θik > Θ∗ik

 µ c (z )ijk (γj +(1−γj )δ )(rj +1)
∗
1/(1-µ)
Kijk =
Θik pj

µ
if Θik > Θ∗jk 0 > Θ∗ik

cik (ri +1)Dij



0
otherwise
The reinvestment footprint of foreign aliates:
1
Reduces nancial costs
1
2
3
Reduces the negative impact of distance
Osets the impact of systemic banking crises at home (i)
Limited by credit constraints at the host country (j)
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
14 / 22
The model
Foreign production
Greeneld FDI with reivestment
 1/(1-µ)

Θik pj (γi +(1−γi )δ )


if Θ∗jk 0 > Θik > Θ∗ik

 µ c (z )ijk (γj +(1−γj )δ )(rj +1)
∗
1/(1-µ)
Kijk =
Θik pj

µ
if Θik > Θ∗jk 0 > Θ∗ik

cik (ri +1)Dij



0
otherwise
The reinvestment footprint of foreign aliates:
1
Reduces nancial costs
1
2
3
Reduces the negative impact of distance
Osets the impact of systemic banking crises at home (i)
Limited by credit constraints at the host country (j)
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
14 / 22
The model
Foreign production
Greeneld FDI with reivestment
 1/(1-µ)

Θik pj (γi +(1−γi )δ )


if Θ∗jk 0 > Θik > Θ∗ik

 µ c (z )ijk (γj +(1−γj )δ )(rj +1)
∗
1/(1-µ)
Kijk =
Θik pj

µ
if Θik > Θ∗jk 0 > Θ∗ik

cik (ri +1)Dij



0
otherwise
The reinvestment footprint of foreign aliates:
1
Reduces nancial costs
1
2
3
Reduces the negative impact of distance
Osets the impact of systemic banking crises at home (i)
Limited by credit constraints at the host country (j)
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
14 / 22
Emprical Strategy
Gravity equation


 +β smctry + β rel + β comcur + β BIT 
6
8
9
ij
ij
ijt
ijt 
 5
 + eij

+β10 FTAijt + β11 Zijt + β12 Zijt ∗ GRit +
ijt = exp 

FDI
β1 ln (Dij ) + β2 borderij + β3 colonyij + β4 langij
β13 Zijt ∗ GRjt + β14 Zijt ∗ ln (Dij ) + λit + λjt
Aggregate bilateral FDI ows
Extensive margin
Jobs (Paniagua & Sapena, 2014, 2015)
PPML (Silva & Tenreyro 2006)
Two independent datasets (2003-2010):
New Greeneld investments (160 countries)
Reinvestment through expansion (143 countries)
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
15 / 22
Emprical Strategy
Gravity equation


 +β smctry + β rel + β comcur + β BIT 
6
8
9
ij
ij
ijt
ijt 
 5
 + eij

+β10 FTAijt + β11 Zijt + β12 Zijt ∗ GRit +
ijt = exp 

FDI
β1 ln (Dij ) + β2 borderij + β3 colonyij + β4 langij
β13 Zijt ∗ GRjt + β14 Zijt ∗ ln (Dij ) + λit + λjt
Aggregate bilateral FDI ows
Extensive margin
Jobs (Paniagua & Sapena, 2014, 2015)
PPML (Silva & Tenreyro 2006)
Two independent datasets (2003-2010):
New Greeneld investments (160 countries)
Reinvestment through expansion (143 countries)
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
15 / 22
Emprical Strategy
Gravity equation


 +β smctry + β rel + β comcur + β BIT 
6
8
9
ij
ij
ijt
ijt 
 5
 + eij

+β10 FTAijt + β11 Zijt + β12 Zijt ∗ GRit +
ijt = exp 

FDI
β1 ln (Dij ) + β2 borderij + β3 colonyij + β4 langij
β13 Zijt ∗ GRjt + β14 Zijt ∗ ln (Dij ) + λit + λjt
Aggregate bilateral FDI ows
Extensive margin
Jobs (Paniagua & Sapena, 2014, 2015)
PPML (Silva & Tenreyro 2006)
Two independent datasets (2003-2010):
New Greeneld investments (160 countries)
Reinvestment through expansion (143 countries)
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
15 / 22
Emprical Strategy
Gravity equation


 +β smctry + β rel + β comcur + β BIT 
6
8
9
ij
ij
ijt
ijt 
 5
 + eij

+β10 FTAijt + β11 Zijt + β12 Zijt ∗ GRit +
ijt = exp 

FDI
β1 ln (Dij ) + β2 borderij + β3 colonyij + β4 langij
β13 Zijt ∗ GRjt + β14 Zijt ∗ ln (Dij ) + λit + λjt
Aggregate bilateral FDI ows
Extensive margin
Jobs (Paniagua & Sapena, 2014, 2015)
PPML (Silva & Tenreyro 2006)
Two independent datasets (2003-2010):
New Greeneld investments (160 countries)
Reinvestment through expansion (143 countries)
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
15 / 22
Emprical Strategy
Gravity equation


 +β smctry + β rel + β comcur + β BIT 
6
8
9
ij
ij
ijt
ijt 
 5
 + eij

+β10 FTAijt + β11 Zijt + β12 Zijt ∗ GRit +
ijt = exp 

FDI
β1 ln (Dij ) + β2 borderij + β3 colonyij + β4 langij
β13 Zijt ∗ GRjt + β14 Zijt ∗ ln (Dij ) + λit + λjt
Aggregate bilateral FDI ows
Extensive margin
Jobs (Paniagua & Sapena, 2014, 2015)
PPML (Silva & Tenreyro 2006)
Two independent datasets (2003-2010):
New Greeneld investments (160 countries)
Reinvestment through expansion (143 countries)
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
15 / 22
Emprical Strategy
Gravity equation


 +β smctry + β rel + β comcur + β BIT 
6
8
9
ij
ij
ijt
ijt 
 5
 + eij

+β10 FTAijt + β11 Zijt + β12 Zijt ∗ GRit +
ijt = exp 

FDI
β1 ln (Dij ) + β2 borderij + β3 colonyij + β4 langij
β13 Zijt ∗ GRjt + β14 Zijt ∗ ln (Dij ) + λit + λjt
Aggregate bilateral FDI ows
Extensive margin
Jobs (Paniagua & Sapena, 2014, 2015)
PPML (Silva & Tenreyro 2006)
Two independent datasets (2003-2010):
New Greeneld investments (160 countries)
Reinvestment through expansion (143 countries)
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
15 / 22
Emprical Strategy
Gravity equation


 +β smctry + β rel + β comcur + β BIT 
6
8
9
ij
ij
ijt
ijt 
 5
 + eij

+β10 FTAijt + β11 Zijt + β12 Zijt ∗ GRit +
ijt = exp 

FDI
β1 ln (Dij ) + β2 borderij + β3 colonyij + β4 langij
β13 Zijt ∗ GRjt + β14 Zijt ∗ ln (Dij ) + λit + λjt
Aggregate bilateral FDI ows
Extensive margin
Jobs (Paniagua & Sapena, 2014, 2015)
PPML (Silva & Tenreyro 2006)
Two independent datasets (2003-2010):
New Greeneld investments (160 countries)
Reinvestment through expansion (143 countries)
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
15 / 22
Emprical Strategy
Gravity equation


 +β smctry + β rel + β comcur + β BIT 
6
8
9
ij
ij
ijt
ijt 
 5
 + eij

+β10 FTAijt + β11 Zijt + β12 Zijt ∗ GRit +
ijt = exp 

FDI
β1 ln (Dij ) + β2 borderij + β3 colonyij + β4 langij
β13 Zijt ∗ GRjt + β14 Zijt ∗ ln (Dij ) + λit + λjt
Aggregate bilateral FDI ows
Extensive margin
Jobs (Paniagua & Sapena, 2014, 2015)
PPML (Silva & Tenreyro 2006)
Two independent datasets (2003-2010):
New Greeneld investments (160 countries)
Reinvestment through expansion (143 countries)
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
15 / 22
Emprical Strategy
Gravity equation


 +β smctry + β rel + β comcur + β BIT 
6
8
9
ij
ij
ijt
ijt 
 5
 + eij

+β10 FTAijt + β11 Zijt + β12 Zijt ∗ GRit +
ijt = exp 

FDI
β1 ln (Dij ) + β2 borderij + β3 colonyij + β4 langij
β13 Zijt ∗ GRjt + β14 Zijt ∗ ln (Dij ) + λit + λjt
Aggregate bilateral FDI ows
Extensive margin
Jobs (Paniagua & Sapena, 2014, 2015)
PPML (Silva & Tenreyro 2006)
Two independent datasets (2003-2010):
New Greeneld investments (160 countries)
Reinvestment through expansion (143 countries)
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
15 / 22
Emprical Strategy
Gravity equation


 +β smctry + β rel + β comcur + β BIT 
6
8
9
ij
ij
ijt
ijt 
 5
 + eij

+β10 FTAijt + β11 Zijt + β12 Zijt ∗ GRit +
ijt = exp 

FDI
β1 ln (Dij ) + β2 borderij + β3 colonyij + β4 langij
β13 Zijt ∗ GRjt + β14 Zijt ∗ ln (Dij ) + λit + λjt
Aggregate bilateral FDI ows
Extensive margin
Jobs (Paniagua & Sapena, 2014, 2015)
PPML (Silva & Tenreyro 2006)
Two independent datasets (2003-2010):
New Greeneld investments (160 countries)
Reinvestment through expansion (143 countries)
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
15 / 22
Emprical Strategy
Gravity equation


 +β smctry + β rel + β comcur + β BIT 
6
8
9
ij
ij
ijt
ijt 
 5
 + eij

+β10 FTAijt + β11 Zijt + β12 Zijt ∗ GRit +
ijt = exp 

FDI
β1 ln (Dij ) + β2 borderij + β3 colonyij + β4 langij
β13 Zijt ∗ GRjt + β14 Zijt ∗ ln (Dij ) + λit + λjt
Aggregate bilateral FDI ows
Extensive margin
Jobs (Paniagua & Sapena, 2014, 2015)
PPML (Silva & Tenreyro 2006)
Two independent datasets (2003-2010):
New Greeneld investments (160 countries)
Reinvestment through expansion (143 countries)
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
15 / 22
Emprical Strategy
Gravity equation


 +β smctry + β rel + β comcur + β BIT 
6
8
9
ij
ij
ijt
ijt 
 5
 + eij

+β10 FTAijt + β11 Zijt + β12 Zijt ∗ GRit +
ijt = exp 

FDI
β1 ln (Dij ) + β2 borderij + β3 colonyij + β4 langij
β13 Zijt ∗ GRjt + β14 Zijt ∗ ln (Dij ) + λit + λjt
Aggregate bilateral FDI ows
Extensive margin
Jobs (Paniagua & Sapena, 2014, 2015)
PPML (Silva & Tenreyro 2006)
Two independent datasets (2003-2010):
New Greeneld investments (160 countries)
Reinvestment through expansion (143 countries)
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
15 / 22
Results
OLS & PPML
Results
FDI
Extensive Margin
Foreing Jobs
(1)
(2)
(3)
(4)
(5)
(6)
ln (Dij )
-0.202***
(0.03)
-0.427**
(0.03)
-0.073***
(0.01)
-0.328***
(0.03)
-0.221***
(0.03)
-0.398***
(0.04)
ij
0.388***
(0.07)
0.537***
(0.05)
0.142***
(0.02)
0.559***
(0.06)
0.320***
(0.07)
0.471***
(0.07)
0.375***
(0.06)
0.472***
(0.05)
0.089***
(0.02)
0.426***
(0.06)
0.343***
(0.06)
0.673***
(0.07)
ij
0.175
(0.15)
0.130
(0.09)
0.002
(0.04)
-0.007
(0.09)
0.196
(0.14)
-0.084
(0.16)
ij
0.125
(0.0768)
0.024
(0.06)
0.070**
(0.02)
0.928
(0.06)
0.215***
(0.07)
0.132
(0.08)
0.226*
(0.119)
0.383***
(0.12)
0.094**
(0.03)
0.213***
(0.10)
0.168*
(0.10)
0.128
(0.11)
0.012
(0.04)
0.051
(0.03)
-0.005
(0.01)
-0.005
(0.03)
0.048
(0.03)
-0.041
(0.04)
0.218***
(0.07)
col
ij
lang
smctry
border
rel
ij
ijt
comcur
ijt
0.0813
(0.06)
0.030
(0.05)
-0.016
(0.01)
0.100**
(0.04)
0.048
(0.05)
ijt
-0.152***
(0.05)
-0.107**
(0.05)
-0.083***
(0.01)
-0.158***
(0.04)
-0.147***
(0.04)
-0.090*
(0.0)
ijt
0.146*
(0.08)
0.148**
(0.07)
0.027
(0.03)
0.113
(0.09)
0.054
(0.07)
0.240**
(0.09)
ijt ∗ GRit
-0.117
(0.221)
0.174
(0.14)
-0.022
(0.09)
-0.101
(0.21)
-0.152
(0.23)
-0.339
(0.22)
FTA
BIT
Z
Z
ijt ∗ GRjt
-0.384
(0.32)
-0.115
(0.26)
-0.167***
(0.05)
-0.282**
(0.12)
0.003
(0.33)
0.278
(0.31)
ijt ∗ ln (Dij )
0.019**
(0.01)
0.018**
(0.01)
0.00353
(0.003)
0.014*
(0.01)
0.007
(0.01)
0.025**
(0.01)
Observations
8877
0.45
27423
0.70
8877
0.42
27143
0.71
8877
0.68
27122
0.77
OLS
PPML
OLS
PPML
OLS
PPML
Z
Z
R
2
Method
Robust standard errors in parentheses. Country*Year Fixed Eects included
* p < 0.10, ** p < 0.05, *** p < 0.01
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
16 / 22
Results
OLS & PPML
Results
FDI
Extensive Margin
Foreing Jobs
(1)
(2)
(3)
(4)
(5)
(6)
ijt
0.146*
(0.08)
0.148**
(0.07)
0.027
(0.03)
0.113
(0.09)
0.054
(0.07)
0.240**
(0.09)
ijt ∗ GRit
-0.117
(0.221)
0.174
(0.14)
-0.022
(0.09)
-0.101
(0.21)
-0.152
(0.23)
-0.339
(0.22)
ijt ∗ GRjt
-0.384
(0.32)
-0.115
(0.26)
-0.167***
(0.05)
-0.282**
(0.12)
0.003
(0.33)
0.278
(0.31)
ijt ∗ ln (Dij )
0.019**
(0.01)
0.018**
(0.01)
0.00353
(0.003)
0.014*
(0.01)
0.007
(0.01)
0.025**
(0.01)
Observations
8877
0.45
27423
0.70
8877
0.42
27143
0.71
8877
0.68
27122
0.77
OLS
PPML
OLS
PPML
OLS
PPML
Z
Z
Z
Z
R
2
Method
Robust standard errors in parentheses. Country*Year Fixed Eects included
* p < 0.10, ** p < 0.05, *** p < 0.01
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
17 / 22
Results
OLS & PPML
Results
FDI
Extensive Margin
Foreing Jobs
(1)
(2)
(3)
(4)
(5)
(6)
ijt
0.146*
(0.08)
0.148**
(0.07)
0.027
(0.03)
0.113
(0.09)
0.054
(0.07)
0.240**
(0.09)
ijt ∗ GRit
-0.117
(0.221)
0.174
(0.14)
-0.022
(0.09)
-0.101
(0.21)
-0.152
(0.23)
-0.339
(0.22)
ijt ∗ GRjt
-0.384
(0.32)
-0.115
(0.26)
-0.167***
(0.05)
-0.282**
(0.12)
0.003
(0.33)
0.278
(0.31)
ijt ∗ ln (Dij )
0.019**
(0.01)
0.018**
(0.01)
0.00353
(0.003)
0.014*
(0.01)
0.007
(0.01)
0.025**
(0.01)
Observations
8877
0.45
27423
0.70
8877
0.42
27143
0.71
8877
0.68
27122
0.77
OLS
PPML
OLS
PPML
OLS
PPML
Z
Z
Z
Z
R
2
Method
Robust standard errors in parentheses. Country*Year Fixed Eects included
* p < 0.10, ** p < 0.05, *** p < 0.01
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
17 / 22
Results
OLS & PPML
Results
FDI
Extensive Margin
Foreing Jobs
(1)
(2)
(3)
(4)
(5)
(6)
ijt
0.146*
(0.08)
0.148**
(0.07)
0.027
(0.03)
0.113
(0.09)
0.054
(0.07)
0.240**
(0.09)
ijt ∗ GRit
-0.117
(0.221)
0.174
(0.14)
-0.022
(0.09)
-0.101
(0.21)
-0.152
(0.23)
-0.339
(0.22)
ijt ∗ GRjt
-0.384
(0.32)
-0.115
(0.26)
-0.167***
(0.05)
-0.282**
(0.12)
0.003
(0.33)
0.278
(0.31)
ijt ∗ ln (Dij )
0.019**
(0.01)
0.018**
(0.01)
0.00353
(0.003)
0.014*
(0.01)
0.007
(0.01)
0.025**
(0.01)
Observations
8877
0.45
27423
0.70
8877
0.42
27143
0.71
8877
0.68
27122
0.77
OLS
PPML
OLS
PPML
OLS
PPML
Z
Z
Z
Z
R
2
Method
Robust standard errors in parentheses. Country*Year Fixed Eects included
* p < 0.10, ** p < 0.05, *** p < 0.01
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
17 / 22
Results
OLS & PPML
Results
FDI
Extensive Margin
Foreing Jobs
(1)
(2)
(3)
(4)
(5)
(6)
ijt
0.146*
(0.08)
0.148**
(0.07)
0.027
(0.03)
0.113
(0.09)
0.054
(0.07)
0.240**
(0.09)
ijt ∗ GRit
-0.117
(0.221)
0.174
(0.14)
-0.022
(0.09)
-0.101
(0.21)
-0.152
(0.23)
-0.339
(0.22)
ijt ∗ GRjt
-0.384
(0.32)
-0.115
(0.26)
-0.167***
(0.05)
-0.282**
(0.12)
0.003
(0.33)
0.278
(0.31)
ijt ∗ ln (Dij )
0.019**
(0.01)
0.018**
(0.01)
0.00353
(0.003)
0.014*
(0.01)
0.007
(0.01)
0.025**
(0.01)
Observations
8877
0.45
27423
0.70
8877
0.42
27143
0.71
8877
0.68
27122
0.77
OLS
PPML
OLS
PPML
OLS
PPML
Z
Z
Z
Z
R
2
Method
Robust standard errors in parentheses. Country*Year Fixed Eects included
* p < 0.10, ** p < 0.05, *** p < 0.01
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
17 / 22
Results
Quantile Regressions
Quantile Regressions
(1)
(2)
(3)
(4)
(5)
Q(0.10)
Q(0.25)
Q(0.50)
Q(0.75)
Q(0.90)
ln (Dij )
-0.342***
(0.05)
-0.271***
(0.04)
-0.207***
(0.02)
-0.221***
(0.03)
-0.204***
(0.02)
ij
0.412***
(0.13)
0.605***
(0.12)
0.532***
(0.08)
0.423***
(0.09)
0.334***
(0.07)
0.443***
(0.10)
0.351***
(0.09)
0.237***
(0.05)
0.111
(0.06)
0.151***
(0.05)
ij
0.0956
(0.24)
-0.00948
(0.21)
0.0860
(0.13)
0.307*
(0.16)
0.331**
(0.13)
ij
-0.188
(0.14)
0.162
(0.13)
0.290***
(0.08)
0.118
(0.09)
-0.00146
(0.07)
-0.0387
(0.12)
-0.0120
(0.11)
0.0855
(0.06)
0.0283
(0.07)
-0.0172
(0.06)
-0.032
(0.07)
0.088
(0.06)
0.001
(0.04)
0.0422
(0.05)
0.002
(0.04)
-0.205***
(0.04)
col
ij
lang
smctry
border
rel
ij
ijt
comcur
ijt
0.082
(0.09)
-0.072
(0.08)
-0.122**
(0.05)
-0.164***
(0.05)
ijt
0.071
(0.07)
0.125*
(0.06)
0.126***
(0.04)
0.074
(0.04)
0.096**
(0.03)
0.282**
(0.14)
0.144
(0.12)
0.225***
(0.08)
0.187**
(0.09)
0.310***
(0.07)
0.054
(0.36)
0.030
(0.35)
0.551**
(0.23)
0.483*
(0.26)
0.403*
(0.20)
FTA
BIT
ijt
Z
ijt ∗ GRit
Z
ijt ∗ GRjt
0.063
(0.61)
-0.957*
(0.56)
-0.789*
(0.41)
-0.269
(0.46)
-0.271
(0.36)
ijt ∗ ln (Dij )
0.035**
(0.01)
0.022
(0.01)
0.028***
(0.01)
0.023**
(0.01)
0.039***
(0.01)
Observations
8877
8877
8877
8877
8877
Z
Z
Standard errors in parentheses
* p < 0.10, ** p < 0.05, *** p < 0.01
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
18 / 22
Results
Quantile Regressions
Quantile Regressions
(1)
(2)
(3)
(4)
(5)
Q(0.10)
Q(0.25)
Q(0.50)
Q(0.75)
Q(0.90)
0.282**
(0.14)
0.144
(0.12)
0.225***
(0.08)
0.187**
(0.09)
0.310***
(0.07)
ijt ∗ GRit
0.054
(0.36)
0.030
(0.35)
0.551**
(0.23)
0.483*
(0.26)
0.403*
(0.20)
ijt ∗ GRjt
0.063
(0.61)
-0.957*
(0.56)
-0.789*
(0.41)
-0.269
(0.46)
-0.271
(0.36)
ijt ∗ ln (Dij )
0.035**
(0.01)
0.022
(0.01)
0.028***
(0.01)
0.023**
(0.01)
0.039***
(0.01)
Observations
8877
8877
8877
8877
8877
ijt
Z
Z
Z
Z
Standard errors in parentheses
* p < 0.10, ** p < 0.05, *** p < 0.01
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
19 / 22
Results
Quantile Regressions
Quantile Regressions
(1)
(2)
(3)
(4)
(5)
Q(0.10)
Q(0.25)
Q(0.50)
Q(0.75)
Q(0.90)
0.282**
(0.14)
0.144
(0.12)
0.225***
(0.08)
0.187**
(0.09)
0.310***
(0.07)
ijt ∗ GRit
0.054
(0.36)
0.030
(0.35)
0.551**
(0.23)
0.483*
(0.26)
0.403*
(0.20)
ijt ∗ GRjt
0.063
(0.61)
-0.957*
(0.56)
-0.789*
(0.41)
-0.269
(0.46)
-0.271
(0.36)
ijt ∗ ln (Dij )
0.035**
(0.01)
0.022
(0.01)
0.028***
(0.01)
0.023**
(0.01)
0.039***
(0.01)
Observations
8877
8877
8877
8877
8877
ijt
Z
Z
Z
Z
Standard errors in parentheses
* p < 0.10, ** p < 0.05, *** p < 0.01
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
19 / 22
Results
Quantile Regressions
Quantile Regressions
(1)
(2)
(3)
(4)
(5)
Q(0.10)
Q(0.25)
Q(0.50)
Q(0.75)
Q(0.90)
0.282**
(0.14)
0.144
(0.12)
0.225***
(0.08)
0.187**
(0.09)
0.310***
(0.07)
ijt ∗ GRit
0.054
(0.36)
0.030
(0.35)
0.551**
(0.23)
0.483*
(0.26)
0.403*
(0.20)
ijt ∗ GRjt
0.063
(0.61)
-0.957*
(0.56)
-0.789*
(0.41)
-0.269
(0.46)
-0.271
(0.36)
ijt ∗ ln (Dij )
0.035**
(0.01)
0.022
(0.01)
0.028***
(0.01)
0.023**
(0.01)
0.039***
(0.01)
Observations
8877
8877
8877
8877
8877
ijt
Z
Z
Z
Z
Standard errors in parentheses
* p < 0.10, ** p < 0.05, *** p < 0.01
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
19 / 22
Results
Quantile Regressions
Quantile Regressions
(1)
(2)
(3)
(4)
(5)
Q(0.10)
Q(0.25)
Q(0.50)
Q(0.75)
Q(0.90)
0.282**
(0.14)
0.144
(0.12)
0.225***
(0.08)
0.187**
(0.09)
0.310***
(0.07)
ijt ∗ GRit
0.054
(0.36)
0.030
(0.35)
0.551**
(0.23)
0.483*
(0.26)
0.403*
(0.20)
ijt ∗ GRjt
0.063
(0.61)
-0.957*
(0.56)
-0.789*
(0.41)
-0.269
(0.46)
-0.271
(0.36)
ijt ∗ ln (Dij )
0.035**
(0.01)
0.022
(0.01)
0.028***
(0.01)
0.023**
(0.01)
0.039***
(0.01)
Observations
8877
8877
8877
8877
8877
ijt
Z
Z
Z
Z
Standard errors in parentheses
* p < 0.10, ** p < 0.05, *** p < 0.01
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
19 / 22
Results
Quantile Regressions
Graphs
Figure: Reinvestment eect by quantile
Figure: Distance by quantile
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
20 / 22
Results
Quantile Regressions
Graphs
Figure: Credit constraints source
Figure: Credit constraints destination
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
21 / 22
Conclusions
Conclusions
1
A gravity model for Greeneld & Reinvestment FDI
FDI nance
Incomplete contracts & limited commitment
2
Our model explains the interplay of greeneld and reinvestment FDI
Reinvestment spills over to greeneld FDI
Financial Channel
3
Reinvestment alleviates:
The negative eect of distance on greeneld FDI
Credit constraints at home
4
Reinvestment spillover is reduced with credit constraints at the host
Foreign FDI nance
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
22 / 22
Conclusions
Conclusions
1
A gravity model for Greeneld & Reinvestment FDI
FDI nance (by-product: zeros)
Incomplete contracts & limited commitment
2
Our model explains the interplay of greeneld and reinvestment FDI
Reinvestment spills over to greeneld FDI
Financial Channel
3
Reinvestment alleviates:
The negative eect of distance on greeneld FDI
Credit constraints at home
4
Reinvestment spillover is reduced with credit constraints at the host
Foreign FDI nance
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
22 / 22
Conclusions
Conclusions
1
A gravity model for Greeneld & Reinvestment FDI
FDI nance (by-product: zeros)
Incomplete contracts & limited commitment
2
Our model explains the interplay of greeneld and reinvestment FDI
Reinvestment spills over to greeneld FDI
Financial Channel
3
Reinvestment alleviates:
The negative eect of distance on greeneld FDI
Credit constraints at home
4
Reinvestment spillover is reduced with credit constraints at the host
Foreign FDI nance
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
22 / 22
Conclusions
Conclusions
1
A gravity model for Greeneld & Reinvestment FDI
FDI nance (by-product: zeros)
Incomplete contracts & limited commitment
2
Our model explains the interplay of greeneld and reinvestment FDI
Reinvestment spills over to greeneld FDI
Financial Channel
3
Reinvestment alleviates:
The negative eect of distance on greeneld FDI
Credit constraints at home
4
Reinvestment spillover is reduced with credit constraints at the host
Foreign FDI nance
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
22 / 22
Conclusions
Conclusions
1
A gravity model for Greeneld & Reinvestment FDI
FDI nance (by-product: zeros)
Incomplete contracts & limited commitment
2
Our model explains the interplay of greeneld and reinvestment FDI
Reinvestment spills over to greeneld FDI
Financial Channel
3
Reinvestment alleviates:
The negative eect of distance on greeneld FDI
Credit constraints at home
4
Reinvestment spillover is reduced with credit constraints at the host
Foreign FDI nance
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
22 / 22
Conclusions
Conclusions
1
A gravity model for Greeneld & Reinvestment FDI
FDI nance (by-product: zeros)
Incomplete contracts & limited commitment
2
Our model explains the interplay of greeneld and reinvestment FDI
Reinvestment spills over to greeneld FDI
Financial Channel
3
Reinvestment alleviates:
The negative eect of distance on greeneld FDI
Credit constraints at home
4
Reinvestment spillover is reduced with credit constraints at the host
Foreign FDI nance
Gil, Llorca, Paniagua (UVEG, UCV) Does greeneld FDI follow reinvestment?
INTECO 2014
22 / 22