What Explains the Geographic Variation in Corporate Investment?

76 Pages Posted: 27 May 2021 Last revised: 10 Sep 2021

See all articles by Shohini Kundu

Shohini Kundu

University of California, Los Angeles (UCLA) - Anderson School of Management; Centre for Economic Policy Research (CEPR)

Nishant Vats

Washington University in Saint Louis, John M. Olin Business School

Date Written: May 22, 2021

Abstract

We show that history can explain the geographic concentration of investment over and above traditional agglomerative forces, geography, and expectations. We use spatial variation in direct and indirect British rule to identify differences in historical circumstances. Using this within-country variation in historical circumstances, combined with a local identification approach and instrumental variable strategy, we explain the spatial differences in investment. Differences in historical origins can explain 13% of total geographic variation in investment. Moreover, investment is 8-10% lower in direct ruled areas. Our results indicate that history can have long-run consequences through its effect on economic organizations and state capacity.

Suggested Citation

Kundu, Shohini and Vats, Nishant, What Explains the Geographic Variation in Corporate Investment? (May 22, 2021). Available at SSRN: https://ssrn.com/abstract=3851008 or http://dx.doi.org/10.2139/ssrn.3851008

Shohini Kundu

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Nishant Vats (Contact Author)

Washington University in Saint Louis, John M. Olin Business School ( email )

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
236
Abstract Views
1,114
Rank
240,949
PlumX Metrics