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GTAP Resources: Resource Display

GTAP Resource #6361

"Estimating cost reductions of multinational activity of a potential Investment Facilitation Agreement."
by Bekkers, Eddy and Yu Roger So

In this paper a gravity framework is used to estimate the impact of investment facilitation on multinational activity and cost reductions of a potential Investment Facilitation Agreement (IFA) are calculated based on the estimate and scenarios for the IFA. Based on recent innovations in the gravity literature, both sales by foreign affiliates and sales of domestic owned firms are included in the estimation. The effect of the investment facilitation indicator (IFI), developed by the German Development Institute, is identified by interacting the IFI with a border dummy for sales by foreign affiliates. With this approach identification is based on the impact of the IFI on affiliate sales compared to sales of domestic owned firms, with as important advantage that multilateral resistance terms can be accounted for by including host and home country fixed effects. The estimation results show that there is a large and significant effect of investment facilitation on affiliate sales in most sectors, even after controlling for other variables measuring the attractiveness of foreign direct investment. The estimated coefficients are combined with scenarios on a potential IFA to calculate cost reductions associated with an IFA which can be used in computable general equilibrium models to simulate the potential economic effects of the IFA.

Resource Details (Export Citation) GTAP Keywords
Category: 2021 Conference Paper
Status: Not published
By/In: Presented during the 24th Annual Conference on Global Economic Analysis (Virtual Conference)
Date: 2021
Version: 1
Created: Bekkers, E. (4/15/2021)
Updated: Batta, G. (6/30/2021)
Visits: 878
- Calibration and parameter estimation
- Foreign direct investment
- Multilateral trade negotiations
- Non-Tariff barriers

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