Trading Spaces: The Political Economy of Foreign Direct Investment Regulation FDI Central to International Economy Research Question Restrictions Vary By Industry Existing Explanations Insufficient

Trading Spaces: The Political Economy of Foreign Direct Investment Regulation FDI Central to International Economy Research Question Restrictions Vary By Industry Existing Explanations Insufficient www.phwiki.com

Trading Spaces: The Political Economy of Foreign Direct Investment Regulation FDI Central to International Economy Research Question Restrictions Vary By Industry Existing Explanations Insufficient

Damiano, Greg, Contributing Writer has reference to this Academic Journal, PHwiki organized this Journal Trading Spaces: The Political Economy of Foreign Direct Investment Regulation Sonal S. P in addition to ya Department of Government Harvard University FDI Central to International Economy Single largest source of global capital flows Generates 20% of world trade flows Promotes economic development Research Question Why do countries regulate as long as eign direct investment

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Restrictions Vary By Industry Industry-Level Foreign Ownership Restrictions 25 Latin American Countries, 1997-2000 Two-digit Industry Categories Restricting Countries 64 Post in addition to telecommunications 10 92 Recreational, cultural in addition to sporting activities 9 40 Electricity, gas, steam in addition to hot water supply 8 66 Insurance in addition to pension funding 8 12 Mining of uranium in addition to thorium ores 7 62 Air transport 7 05 Fishing, operation of fish hatcheries in addition to fish farms 6 11 Extraction of crude petroleum in addition to natural gas 6 60 L in addition to transport; transport via pipelines 6 10 Mining of coal in addition to lignite; extraction of peat 5

Existing Explanations Insufficient Nationalism can’t account of multiple dimensions of variation Scholarly literature makes assumptions re: governments preferences as long as FDI No Microfoundations Political Economy Approach Identifies Sources of Variation FDI inflows redistribute income Political cleavages between winners in addition to losers Politicians negotiate tradeoffs Vertical FDI Home Country Host Country FDI Inflow Finished Product

Politics of Vertical FDI Vertical FDI’s Economic Effect Increases labor dem in addition to Political cleavage Labor vs. Capital Local wages & production costs increase Salient Political Institution Partisanship Horizontal FDI Home Country Host Country FDI Inflow Finished Product Politics of Horizontal FDI Horizontal FDI’s Economic Effect Increases market competition Political cleavage Producers vs. Consumers Local firms’ profit & prices decrease Salient Political Institution Electoral Competition

Alternate Explanation: Nationalism FDI increases as long as eign ownership Foreign ownership threatens national identity Hypotheses Left governments are less likely to restrict vertical FDI Electoral competition reduces the probability of restrictions on horizontal FDI Nationalist governments more likely to restrict FDI Measuring FDI Regulation Foreign ownership restriction 1 = banned, only minority share allowed 0 = no limit Data coded from US Commercial Guides 119 countries, 58 industries, 1990s (pooled) Approx. 30% of country-industries restricted

Measuring Propensity Vertical FDI Restrictions Interaction of Host Labor Supply in addition to Industry Labor Dem in addition to Data: Average Schooling Industry per worker value-added as long as US- based multinational firms Partisanship Support as long as Vertical FDI at Low Skill Levels = significant at .1 level Logit Model Estimates Measuring Industry’s Propensity to Receive Horizontal FDI Restriction Incentives to enter market via horizontal FDI Data Host country GDP Gravity model estimates of trade barriers Degree electoral competition

Nationalist Governments Less Likely to Restrict Shift to executive from nationalist party decreases expected probability of ownership restriction by 24 percentage points. st in addition to ard deviation = .08

Summary of Results Left parties less likely to restrict FDI in lower skilled industries Weak democracies use FDI restrictions as substitutes as long as trade restrictions; in stronger democracies restrictions less sensitive to market entry barriers Governments led by nationalist executives less likely to restrict FDI

Damiano, Greg Game Revolution Contributing Writer www.phwiki.com

Damiano, Greg Contributing Writer

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