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Title: Localization of FDI flows: evidence on infrastructure as a critical determinant
Authors: Chakrabarti, Rajesh
Subramanian, Krishnamurthy
Meka, Sesha
Keywords: International Corporate Finance
International Business
Issue Date: 31-Dec-2017
Publisher: Now Publisher
Citation: Journal of Law, Finance and Accounting, Vol.2 No.1 (2017): 205-246
Abstract: The localization of Foreign Direct Investment (FDI) to a few economies represents a puzzling aspect of international business. We study the provision of public infrastructure as a determinant of such localization. We employ unique data at the district level in India. We identify using variation: (i) among sectors within a district depending upon the sector’s propensity to attract FDI at the national level; and (ii) FDI into surrounding districts. We find that FDI inflows remain insensitive to changes in infrastructure till a threshold is reached; thereafter, FDI inflows increase steeply with an increase in infrastructure. This non-linear effect potentially explains why FDI remains restricted to a few countries.
ISSN: 2380-5005
Appears in Collections:JGU Research Publications

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