Two essays on regional integration and foreign direct investment and one essay on intergenerational linkages in consumption behavior
Abstract
Foreign capital flows to developing countries have risen substantially during the last decade. At the same time, there has been a new wave of regional trade agreements involving both developed and developing countries. A major motive of developing and emerging economies for entering these agreements is to increase their attractiveness to foreign investors. Increased foreign direct investment (FDI) may occur due to a commitment value that such agreements confer. The first chapter investigates theoretically how such a commitment value may arise and what effect it will have on FDI. This is analyzed in a simple model of lumpy investment with expropriation. The major finding is that FDI from the partner country in the agreement almost always increases, whereas the effect on investment from countries outside of the agreement is ambiguous. The second chapter empirically investigates whether there is evidence of such a commitment effect in the North American Free Trade Agreement (NAFTA). The major finding is that NAFTA has significantly increased direct investment in Mexico, but it has done so almost entirely by raising investment from the United States and Canada, the partner countries in the agreement. The effect on direct investment from other countries is small. This result is consistent with the theory. The third chapter analyzes intergenerational linkages in consumption behavior. It investigates familial relationships in consumption patterns using a sample of parents and their children from the Panel Study of Income Dynamics. It finds a positive and statistically significant parent-specific effect on children's consumption even after controlling for the effect of parental income. But we also find that children's consumption responds negatively to large post-retirement shortfalls in consumption of the parents. These results suggest that although income is an important source of the intergenerational correlation, parental choices and experiences also affect consumption behavior of the children.
Recommended Citation
Andreas Waldkirch,
"Two essays on regional integration and foreign direct investment and one essay on intergenerational linkages in consumption behavior"
(January 1, 2001).
Boston College Dissertations and Theses.
Paper AAI3021597.
http://escholarship.bc.edu/dissertations/AAI3021597
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