Gravity for FDI

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URI: http://nbn-resolving.de/urn:nbn:de:bsz:21-opus-30718
http://hdl.handle.net/10900/47554
Dokumentart: WorkingPaper
Date: 2007
Source: Tübinger Diskussionsbeiträge der Wirtschaftswissenschaftlichen Fakultät ; 313
Language: English
Faculty: 6 Wirtschafts- und Sozialwissenschaftliche Fakultät
Department: Wirtschaftswissenschaften
DDC Classifikation: 330 - Economics
Keywords: Währung
Other Keywords: Gravitationsgleichung
Gravity equation , multinational firms , heterogeneity
License: http://tobias-lib.uni-tuebingen.de/doku/lic_ohne_pod.php?la=de http://tobias-lib.uni-tuebingen.de/doku/lic_ohne_pod.php?la=en
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Abstract:

Gravity equations explaining foreign affiliates’ sales are ad hoc and hence, estimated coefficients are hard to interpret. We therefore provide the theoretical underpinnings of the gravity equation applied to the analysis of sales of foreign affiliates of multinational firms. We argue that the success of the gravity equation results from the fact that it can be derived from various theoretical models. We illustrate this point by deriving a gravity equation from three different models of multinational firms. Using data on real affiliate sales, we show how this derived gravity equation can nevertheless be used to discriminate between the different theoretical models.

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