Regional Integration and Foreign Direct Investment

38 Pages Posted: 12 Jul 2000 Last revised: 31 Jul 2008

See all articles by Magnus Blomstrom

Magnus Blomstrom

Stockholm School of Economics - Department of Economics; National Bureau of Economic Research (NBER), at New York; Centre for Economic Policy Research (CEPR)

Ari Kokko

Stockholm School of Economics; National Bureau of Economic Research (NBER)

Date Written: April 1997

Abstract

This paper deals with the investment effects of regional integration agreements and discusses how such arrangements may affect inward and outward foreign direct investment flows in the integrating region. After setting up a conceptual framework for the analysis, we provide three studies focusing on different kinds of regional integration: North-North integration (Canada joining CUSFTA), North-South integration (Mexico's accession to NAFTA), and South-South integration (MERCOSUR). The main conclusion of the study is that the responses to an integration agreement largely depend on the environmental change brought about by the agreement and the locational advantages of the participating countries and industries. Moreover, the findings suggest that the most positive impact on FDI has occurred when regional integration agreements have coincided with domestic liberalization and macroeconomic stabilization in the member countries.

Suggested Citation

Blomstrom, Magnus and Kokko, Ari, Regional Integration and Foreign Direct Investment (April 1997). NBER Working Paper No. w6019. Available at SSRN: https://ssrn.com/abstract=226429

Magnus Blomstrom (Contact Author)

Stockholm School of Economics - Department of Economics ( email )

P.O. Box 6501
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S-113 83 Stockholm
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+46 8 736 9265 (Phone)
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National Bureau of Economic Research (NBER), at New York

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Centre for Economic Policy Research (CEPR)

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Ari Kokko

Stockholm School of Economics ( email )

P.O. Box 6501
Stockholm
Sweden
+46 8 736 9365 (Phone)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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