NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Regional Integration and Foreign Direct Investment

Magnus Blomstrom, Ari Kokko

NBER Working Paper No. 6019
Issued in April 1997
NBER Program(s):   ITI

This paper deals with the investment effects of regional integration agreements and discusses how such arrangements may affect inward and outward foreign direct investment flows in the integrating region. After setting up a conceptual framework for the analysis, we provide three studies focusing on different kinds of regional integration: North-North integration (Canada joining CUSFTA), North-South integration (Mexico's accession to NAFTA), and South-South integration (MERCOSUR). The main conclusion of the study is that the responses to an integration agreement largely depend on the environmental change brought about by the agreement and the locational advantages of the participating countries and industries. Moreover, the findings suggest that the most positive impact on FDI has occurred when regional integration agreements have coincided with domestic liberalization and macroeconomic stabilization in the member countries.

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Document Object Identifier (DOI): 10.3386/w6019

Published:

  • Published as "Foreign District Investment and Employment: Home Country Experience in the United States and Sweden", Economic Journal (1997).
  • Regions, Globalization and the Knowledge-Based Economy, Dunning, John, ed., Oxford: Oxford University Press, 2000.

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