Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/333501 
Year of Publication: 
2025
Series/Report no.: 
wiiw Working Paper No. 268
Publisher: 
The Vienna Institute for International Economic Studies (wiiw), Vienna
Abstract: 
This paper re-examines foreign direct investment motives in the 'FDI gravity' model (Kleinert and Toubal, 2010), focusing on the role of distance. More precisely, we investigate whether aggregate and pooled gravity models for FDI obscure relevant heterogeneities across sectors. This is possible through the novel MREID dataset, which provides us with FDI data at the 2-digit NAICS level for 184 countries over the period 2010 to 2020. Our results reveal that aggregate and pooled models mask significant sector heterogeneities in two aspects: (i) in the importance of horizontal versus vertical FDI motives, and (ii) in the distance elasticity. The latter reflects that distance potentially captures more complex sector-specific components than are captured in the current gravity model for FDI.
Subjects: 
Gravity model
foreign direct investment
sector heterogeneity
JEL: 
F21
F23
Document Type: 
Working Paper

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