Estimating the Impact of Time-Invariant Variables on FDI with Fixed Effects

Ronald B. Davies, Delia Simona Ionascu, Helga Kristjánsdóttir

Research output: Working paperResearch

14 Downloads (Pure)

Abstract

This paper applies the panel fixed effects with vector decomposition estimator to three FDI datasets to estimate the impact of time-invariant variables on FDI while including fixed effects. We find that the omission of fixed effects significantly biases several of these variables, especially those proxying for trade costs and culture. After including fixed effects, we find that many time-invariant variables indicate the importance of vertical FDI. We also find that by eliminating these biases, the differences across datasets largely disappear. Thus, controversies in the literature that are driven by differences in data sets may be resolved by using this estimation technique.
Original languageEnglish
Place of PublicationCopenhagen
PublisherSamfundslitteratur
Number of pages38
Publication statusPublished - 2007

Cite this

Davies, R. B., Ionascu, D. S., & Kristjánsdóttir, H. (2007). Estimating the Impact of Time-Invariant Variables on FDI with Fixed Effects. Copenhagen: Samfundslitteratur.
Davies, Ronald B. ; Ionascu, Delia Simona ; Kristjánsdóttir, Helga. / Estimating the Impact of Time-Invariant Variables on FDI with Fixed Effects. Copenhagen : Samfundslitteratur, 2007.
@techreport{bb1d6b40ffc111db9160000ea68e967b,
title = "Estimating the Impact of Time-Invariant Variables on FDI with Fixed Effects",
abstract = "This paper applies the panel fixed effects with vector decomposition estimator to three FDI datasets to estimate the impact of time-invariant variables on FDI while including fixed effects. We find that the omission of fixed effects significantly biases several of these variables, especially those proxying for trade costs and culture. After including fixed effects, we find that many time-invariant variables indicate the importance of vertical FDI. We also find that by eliminating these biases, the differences across datasets largely disappear. Thus, controversies in the literature that are driven by differences in data sets may be resolved by using this estimation technique.",
author = "Davies, {Ronald B.} and Ionascu, {Delia Simona} and Helga Kristj{\'a}nsd{\'o}ttir",
year = "2007",
language = "English",
publisher = "Samfundslitteratur",
address = "Denmark",
type = "WorkingPaper",
institution = "Samfundslitteratur",

}

Davies, RB, Ionascu, DS & Kristjánsdóttir, H 2007 'Estimating the Impact of Time-Invariant Variables on FDI with Fixed Effects' Samfundslitteratur, Copenhagen.

Estimating the Impact of Time-Invariant Variables on FDI with Fixed Effects. / Davies, Ronald B.; Ionascu, Delia Simona; Kristjánsdóttir, Helga.

Copenhagen : Samfundslitteratur, 2007.

Research output: Working paperResearch

TY - UNPB

T1 - Estimating the Impact of Time-Invariant Variables on FDI with Fixed Effects

AU - Davies, Ronald B.

AU - Ionascu, Delia Simona

AU - Kristjánsdóttir, Helga

PY - 2007

Y1 - 2007

N2 - This paper applies the panel fixed effects with vector decomposition estimator to three FDI datasets to estimate the impact of time-invariant variables on FDI while including fixed effects. We find that the omission of fixed effects significantly biases several of these variables, especially those proxying for trade costs and culture. After including fixed effects, we find that many time-invariant variables indicate the importance of vertical FDI. We also find that by eliminating these biases, the differences across datasets largely disappear. Thus, controversies in the literature that are driven by differences in data sets may be resolved by using this estimation technique.

AB - This paper applies the panel fixed effects with vector decomposition estimator to three FDI datasets to estimate the impact of time-invariant variables on FDI while including fixed effects. We find that the omission of fixed effects significantly biases several of these variables, especially those proxying for trade costs and culture. After including fixed effects, we find that many time-invariant variables indicate the importance of vertical FDI. We also find that by eliminating these biases, the differences across datasets largely disappear. Thus, controversies in the literature that are driven by differences in data sets may be resolved by using this estimation technique.

M3 - Working paper

BT - Estimating the Impact of Time-Invariant Variables on FDI with Fixed Effects

PB - Samfundslitteratur

CY - Copenhagen

ER -

Davies RB, Ionascu DS, Kristjánsdóttir H. Estimating the Impact of Time-Invariant Variables on FDI with Fixed Effects. Copenhagen: Samfundslitteratur. 2007.