The Determinants of the U.S. Foreign Direct Investment: Does the Region Matter?

Abstract

This study seeks to explain the variation in U.S. foreign direct investment (FDI) in Latin America and Asia. The analysis focuses on 19 Latin American and Asian countries for the period of 1979–1999. The results show that the variation in the U.S. FDI can largely be attributed to the differences in fundamental economic and social factors such as market size, gross domestic product (GDP) growth, macro-economic stability, the degree of trade openness, and both school enrollment and infrastructure availability. Separating the data into two time periods reveals interesting results about the location decisions for U.S. investors. In addition, the results from the comparison between the two regions show that Latin American countries clearly attract U.S. FDI for different reasons than Asian countries.