Gravity for FDI

23 Pages Posted: 11 Nov 2005

See all articles by Joern Kleinert

Joern Kleinert

University of Tuebingen - Department of Economics

Farid Toubal

Ecole Normale Superieure de Cachan (ENS) - Departement of Economics ans Management; National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST); Centre d'Etudes Prospectives et d'Info. Internationales (CEPII)

Date Written: October 24, 2007

Abstract

We derive gravity equations from three different general equilibrium models incorporating multinational firms. We show that gravity equations are particularly adapted to the analysis of foreign affiliates' activities of multinational firms. However, the different theoretical models lead to different specifications and interpretations of the empirical results. This is particularly the case considering gravity equations derived from factor proportion models compared to those derived from proximity concentration theories.

Keywords: Gravity equation, multinational firms, heterogeneity

JEL Classification: F23, F12, C21

Suggested Citation

Kleinert, Joern and Toubal, Farid, Gravity for FDI (October 24, 2007). Available at SSRN: https://ssrn.com/abstract=844724 or http://dx.doi.org/10.2139/ssrn.844724

Joern Kleinert

University of Tuebingen - Department of Economics ( email )

Mohlstrasse 36
D-72074 Tuebingen, 72074
Germany

Farid Toubal (Contact Author)

Ecole Normale Superieure de Cachan (ENS) - Departement of Economics ans Management ( email )

France

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST) ( email )

15 Boulevard Gabriel Peri
Malakoff Cedex, 1 92245
France

Centre d'Etudes Prospectives et d'Info. Internationales (CEPII) ( email )

9 rue Georges Pitard
Paris Cedex 15, F-75015
France

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