Institutions and Offshoring Decision

43 Pages Posted: 9 Aug 2007

See all articles by Marcella Nicolini

Marcella Nicolini

University of Pavia - Department of Economics and Management

Date Written: August 2007


Several papers have proven that the institutional environment of the receiving country can influence the choice to establish an FDI. Property rights theory suggests that contract enforcement matters differentially across sectors. This paper is the first attempt to test whether institutions matter differentially across different sectors in FDI decision. Using data on U.S. Direct Investment Abroad, I find that institutional characteristics of the country and the industry positively affect the volume of offshoring between U.S. companies and their affiliates. The suggested argument is stronger for the intermediate products, while the evidence is weak for products ready for sale.

JEL Classification: F10, F23

Suggested Citation

Nicolini, Marcella, Institutions and Offshoring Decision (August 2007). CESifo Working Paper No. 2074. Available at SSRN:

Marcella Nicolini (Contact Author)

University of Pavia - Department of Economics and Management ( email )

Strada Nuova, 65
Pavia, 27100

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