Determinants of U.S. Direct Investment in the E.E. C. Revisited/Comment

A model is presented to identify the determinants of US direct foreign investment in the European Economic Community (EEC). The work of Lunn (1980) is reviewed. The model uses a longer data series and an improved tariff discrimination proxy. Predicted sales are estimated and used as the output varia...

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Bibliographic Details
Published in:European economic review 1983-05, Vol.21 (3), p.381
Main Authors: Scaperlanda, Anthony, Balough, Robert S, Lunn, John
Format: Article
Language:English
Subjects:
Economic models
Economic theory
Foreign investment
Hypotheses
Multinational corporations
Regression analysis
Tariffs
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Summary:A model is presented to identify the determinants of US direct foreign investment in the European Economic Community (EEC). The work of Lunn (1980) is reviewed. The model uses a longer data series and an improved tariff discrimination proxy. Predicted sales are estimated and used as the output variable in the empirical work. A variable capturing the effect of the US capital control programs is also employed. Results reaffirm the importance of market size in attracting direct foreign investment. Plant and equipment equations, in particular, bear this out. Findings also support the growth hypothesis and the tariff discrimination hypothesis. However, the tariff discrimination variable might be made more sophisticated by introducing modifications in the EEC's common external tariffs. Lunn replies that the structural changes in the international economy since the 1970s increase the hazards of drawing inferences from the empirical results of Scaperlanda and Balough.
ISSN:0014-2921
1873-572X