North American Integration and Canadian Foreign Direct Investment

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Waldkirch A., Tekin-Koru A.

B E JOURNAL OF ECONOMIC ANALYSIS & POLICY, cilt.10, sa.1, 2010 (SSCI) identifier identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 10 Sayı: 1
  • Basım Tarihi: 2010
  • Doi Numarası: 10.2202/1935-1682.2255
  • Dergi Adı: B E JOURNAL OF ECONOMIC ANALYSIS & POLICY
  • Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus
  • Anahtar Kelimeler: FDI, multinationals, NAFTA, Canada, KNOWLEDGE-CAPITAL MODEL, DIFFERENCE-IN-DIFFERENCES, MULTINATIONAL-ENTERPRISE, ECONOMIC-INTEGRATION, EXCHANGE-RATES, FDI
  • TED Üniversitesi Adresli: Hayır

Özet

We investigate how economic integration in North America has altered the pattern of foreign direct investment (FDI) to and from Canada. The theoretical analysis suggests that while the Canadian-U.S. free trade agreement should generate less FDI, the addition of Mexico in the North American Free Trade Agreement (NAFTA) produces the opposite effect. The fall in trade costs results in investment diversion from the U.S. and Canada, yet lower fixed costs may increase FDI even in those countries via an increased incentive to locate production facilities abroad rather than only domestically. Using a difference-in-differences estimator, we find that U.S. FDI in Canada as well as Canadian FDI in the U.S. have expanded disproportionately since NAFTA, suggesting that the latter effect dominates.