Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/233742 
Year of Publication: 
2021
Citation: 
[Journal:] The World Economy [ISSN:] 1467-9701 [Volume:] 44 [Issue:] 9 [Publisher:] Wiley [Place:] Hoboken, NJ [Year:] 2021 [Pages:] 2572-2603
Publisher: 
Wiley, Hoboken, NJ
Abstract: 
This paper studies bilateral cultural preferences as an asymmetric dimension of cultural proximity and estimates their effect on greenfield foreign direct investment (FDI). We derive a gravity equation of FDI and test simultaneously the impact of both (a) the preferences of investing countries for recipients' culture and (b) recipients' preferences for the culture in the investing economies. While the role of investors' preferences can be rationalised with existing supply-side gravity theories of FDI, we propose new mechanisms to explain why recipients' preferences might matter as well. We use exports and imports of cultural goods to proxy for the two directions of cultural preferences. Our results reveal a stronger investment effect of the recipients' preferences, a channel so far understudied.
Subjects: 
cultural proximity
gravity model
greenfield FDI
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Article
Document Version: 
Published Version

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