Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/121193
Authors: 
Egger, Peter
Year of Publication: 
2008
Series/Report no.: 
FIW Research Reports 011
Abstract: 
Trade economists have for long considered gravity models to estimate unexhausted potentials for bilateral trade. Similar to the discrepancy between "normal" and "actual" bilateral trade, one may ask the question about the difference between "normal" and actual bilateral multinational activity. However, with multinational activity, zero bilateral data and heteroscedasticity are very important, even more so than with trade data. Therefore, this paper suggests using generalized linear rather than log-linear models to specify "normal" FDI and obtain estimates of unexhausted FDI potentials. I use panel data on Austria?s bilateral multinational activity across 25 countries and 7 country-blocs, 4 sectors and 13 years to illustrate the disadvantage of log-linear model estimation at quasi-maximum likelihood estimation.
Subjects: 
Foreign Direct Investment
Multinational activity
Gravity model
Trade potentials
JEL: 
F14
F15
F21
F23
Document Type: 
Research Report

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