Looking Through Conduit FDI in Search of Ultimate Investors – A Probabilistic Approach

38 Pages Posted: 11 Jun 2020

See all articles by Bruno Casella

Bruno Casella

United Nations - Conference on Trade and Development (UNCTAD)

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Date Written: April 26, 2019

Abstract

This paper presents a novel computational method to determine the distribution of ultimate investors in bilateral FDI stock. The approach employs results from the probabilistic theory of absorbing Markov chains. The method allows for the estimation of a bilateral matrix that provides inward positions by ultimate counterparts for over 100 recipient countries, covering 95% of total FDI stock and including many developing countries. Reconstructing the global FDI network by ultimate investors enables a more accurate and complete snapshot of international production than do standalone bilateral FDI statistics. This has considerable implications for policymaking. It also provides more nuanced context to some contemporary developments such as the trade tensions between the United States, China and others, as well as Brexit.

Keywords: ultimate investors, bilateral FDI, conduit FDI, international production, absorbing Markov chains

Suggested Citation

Casella, Bruno, Looking Through Conduit FDI in Search of Ultimate Investors – A Probabilistic Approach (April 26, 2019). Transnational Corporations Journal, Vol. 26, No. 1, 2019, Available at SSRN: https://ssrn.com/abstract=3622003

Bruno Casella (Contact Author)

United Nations - Conference on Trade and Development (UNCTAD) ( email )

Palais des Nations
Office E 8074
Geneva, 1211
Switzerland

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