Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/2721 
Year of Publication: 
2000
Series/Report no.: 
Research Paper No. 2000,19
Publisher: 
Centre for Research on Globalisation and Labour Markets, School of Economics, University of Nottingham, Nottingham
Abstract: 
According to the ‘convergence hypothesis’ multinational companies will tend to displace national firms and trade as total market size increases and as countries converge in relative size, factor endowments, and production costs. Using a recent model developed by Markusen and Venables (1998) as a theoretical framework, we explicitly develop empirical measures to proxy bilateral FDI between two countries and address their properties with regard to the convergence hypothesis. Using a panel of data of country pairs over the years 1985-96 we econometrically test for the relationship between convergence and bilateral FDI. Our results provide some empirical support for the convergence hypothesis.
Document Type: 
Working Paper

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