Bureau Of Economic Analysis Data Research Articles

The impact of Medicaid expansion on state expenditures through the COVID-19 era.

To investigate the impact of Medicaid expansion on state expenditures through the end of 2022. We used data from the National Association of State Budget Officers (NASBO)'s State Expenditure Report, Kaiser Family Foundation (KFF)'s Medicaid expansion tracker, US Bureau of Labor Statistics data (BLS), US Bureau of Economic Analysis data (BEA), and Pandemic Response Accountability Committee Oversight (PRAC). We investigated spending per capita (by state population) across seven budget categories, including Medicaid spending, and four spending sources. We performed a difference-in-differences (DiD) analysis that compared within-state changes in spending over time in expansion and nonexpansion states to estimate the effect of Medicaid expansion on state budgets. We adjusted for annual state unemployment rate, annual state per capita personal income, and state spending of Coronavirus Relief Funds (CRF) from 2020 to 2022 and included state and year fixed effects. We linked annual state-level data on state-reported fiscal year expenditures from NASBO with state-level characteristics from BLS and BEA data and with CRF state spending from PRAC. Medicaid expansion was associated with an average increase of 21% (95% confidence interval [CI]: 16%-25%) in per capita Medicaid spending after Medicaid expansion among states that expanded prior to 2020. After inclusion of an interaction term to separate between the coronavirus disease (COVID) era (2020-2022) and the prior period following expansion (2015-2019), we found that although Medicaid expansion led to an average increase of 33% (95% CI: 21%-45%) in federal funding of state expenditures in the post-COVID years, it was not significantly associated with increased state spending. There was no evidence of crowding out of other state expenditure categories or a substantial impact on total state spending, even in the COVID-19 era. Increased federal expenditures may have shielded states from substantial budgetary impacts.

Assessing COVID-19 pandemic policies and behaviours and their economic and educational trade-offs across US states from Jan 1, 2020, to July 31, 2022: an observational analysis

The USA struggled in responding to the COVID-19 pandemic, but not all states struggled equally. Identifying the factors associated with cross-state variation in infection and mortality rates could help to improve responses to this and future pandemics. We sought to answer five key policy-relevant questions regarding the following: 1) what roles social, economic, and racial inequities had in interstate variation in COVID-19 outcomes; 2) whether states with greater health-care and public health capacity had better outcomes; 3) how politics influenced the results; 4) whether states that imposed more policy mandates and sustained them longer had better outcomes; and 5) whether there were trade-offs between a state having fewer cumulative SARS-CoV-2 infections and total COVID-19 deaths and its economic and educational outcomes. Data disaggregated by US state were extracted from public databases, including COVID-19 infection and mortality estimates from the Institute for Health Metrics and Evaluation's (IHME) COVID-19 database; Bureau of Economic Analysis data on state gross domestic product (GDP); Federal Reserve economic data on employment rates; National Center for Education Statistics data on student standardised test scores; and US Census Bureau data on race and ethnicity by state. We standardised infection rates for population density and death rates for age and the prevalence of major comorbidities to facilitate comparison of states' successes in mitigating the effects of COVID-19. We regressed these health outcomes on prepandemic state characteristics (such as educational attainment and health spending per capita), policies adopted by states during the pandemic (such as mask mandates and business closures), and population-level behavioural responses (such as vaccine coverage and mobility). We explored potential mechanisms connecting state-level factors to individual-level behaviours using linear regression. We quantified reductions in state GDP, employment, and student test scores during the pandemic to identify policy and behavioural responses associated with these outcomes and to assess trade-offs between these outcomes and COVID-19 outcomes. Significance was defined as p<0·05. Standardised cumulative COVID-19 death rates for the period from Jan 1, 2020, to July 31, 2022 varied across the USA (national rate 372 deaths per 100 000 population [95% uncertainty interval [UI] 364-379]), with the lowest standardised rates in Hawaii (147 deaths per 100 000 [127-196]) and New Hampshire (215 per 100 000 [183-271]) and the highest in Arizona (581 per 100 000 [509-672]) and Washington, DC (526 per 100 000 [425-631]). A lower poverty rate, higher mean number of years of education, and a greater proportion of people expressing interpersonal trust were statistically associated with lower infection and death rates, and states where larger percentages of the population identify as Black (non-Hispanic) or Hispanic were associated with higher cumulative death rates. Access to quality health care (measured by the IHME's Healthcare Access and Quality Index) was associated with fewer total COVID-19 deaths and SARS-CoV-2 infections, but higher public health spending and more public health personnel per capita were not, at the state level. The political affiliation of the state governor was not associated with lower SARS-CoV-2 infection or COVID-19 death rates, but worse COVID-19 outcomes were associated with the proportion of a state's voters who voted for the 2020 Republican presidential candidate. State governments' uses of protective mandates were associated with lower infection rates, as were mask use, lower mobility, and higher vaccination rate, while vaccination rates were associated with lower death rates. State GDP and student reading test scores were not associated with state COVD-19 policy responses, infection rates, or death rates. Employment, however, had a statistically significant relationship with restaurant closures and greater infections and deaths: on average, 1574 (95% UI 884-7107) additional infections per 10 000 population were associated in states with a one percentage point increase in employment rate. Several policy mandates and protective behaviours were associated with lower fourth-grade mathematics test scores, but our study results did not find a link to state-level estimates of school closures. COVID-19 magnified the polarisation and persistent social, economic, and racial inequities that already existed across US society, but the next pandemic threat need not do the same. US states that mitigated those structural inequalities, deployed science-based interventions such as vaccination and targeted vaccine mandates, and promoted their adoption across society were able to match the best-performing nations in minimising COVID-19 death rates. These findings could contribute to the design and targeting of clinical and policy interventions to facilitate better health outcomes in future crises. Bill & Melinda Gates Foundation, J Stanton, T Gillespie, J and E Nordstrom, and Bloomberg Philanthropies.

State productivity and economic growth

ABSTRACT This study uses Bureau of Economic Analysis data on state-level productivity levels and growth rates over the period 1977–2019. We find that states with relatively high productivity tend to experience somewhat lower productivity growth over time, whereas states with relatively lower productivity experience somewhat higher productivity growth over time. We find compelling evidence for significant contributions from education (in the form of a college degree) as well as the role played by higher growth rates in the state-level Hispanic population as factors contributing to increased productivity. Worker/labour productivity constitutes a good indicator of changes to wages and living standards. Empirically examining interstate differences in state-level worker productivity growth across different time intervals helps to identify factors that influence geographical differentials in productivity as well as aids in the identification of the specific factors that determine rates of productivity growth and decline.

A Macroeconomic Model of Federal and Commercial Spectrum Usage

All wireless communication depends on effective and efficient access to the electromagnetic spectrum. Spectrum is a critical national resource that enables both national and economic security. Demand for spectrum is growing, while its supply is practically limited. A Macroeconomic Model of Federal and Commercial Spectrum Usage is one of multiple research projects on the topic of Spectrum Innovation for the Whole-of-Nation. This research is developing innovative toolsets and capabilities to help meet the United States (U.S.) objective of using electromagnetic spectrum as efficiently and effectively as possible while balancing economic, national security, and other national goals now and in the future. The project team built a capability to conduct objective and transparent macroeconomic analysis of the impact of spectrum decisions on the U.S. economy. The initial proof-of-concept model addressed the questions: What value does spectrum bring to the U.S. economy based on a shift from fourth generation (4G) to fifth generation (5G) wireless technology? What is the marginal value of additional spectrum to 5G? This spectrum macroeconomic model estimates the impact of spectrum decisions on U.S. Gross Domestic Product (GDP). The model consists of three components: a wireless network infrastructure model that estimates the relative costs of 4G and 5G services, a 5G use case model that estimates industry level impacts on cost and demand, and a tailored a computable general equilibrium (CGE) model that estimates economy-wide, impacts. This research required a diverse team with multi-disciplinary expertise in economics, modeling, electromagnetic spectrum, wireless communications, wireless network infrastructure, operations research, systems engineering, and policy. The team developed new methodologies and integrated data sets across multiple domains including: 4G and 5G wireless gross and network demand, wireless network cell sizes and throughput, demand over geographic coverage areas, downlink allocation and efficiency, mobile network operators, channelization, cost of production for 4G and 5G wireless services (capital, labor, other intermediate goods), operating expenses, network buildout strategies, total factor of productivity assumptions, depreciation rates, useful life of capital, residual value of assets, national income product account data, and Census and Bureau of Economic Analysis data on population, labor supply, GDP components, inflation indices, and exchange rates. This novel research tailored a best-in-class CGE model to the spectrum domain. In addition to building the model, the team examined relationships between parameters and variables of the different models to test the overall sensitivity and developed initial results and key findings. The research can be used to inject objective data and optimization into decision-making processes. Applications of the model could inform Federal spectrum sharing/allocation policies, 5G and sixth generation (6G) network evolution strategies, and balancing Federal/Non-Federal spectrum value. This research contributes to addressing spectrum issues with an impartial, transparent, consistent methodology across stakeholders, in the public interest, and as a Whole-of-Nation.

The effect of supplier industry competition on pay-for-performance incentive intensity

We examine how supplier industry competition affects CEO incentive intensity in procuring firms. Using Bureau of Economic Analysis data to compute a weighted supplier industry competition measure, we predict and find that higher supplier competition is associated with stronger CEO pay-for-performance incentive intensity. This effect is incremental to that of the firm's own industry competition previously documented and is robust to alternative measures of supplier competition and to exogenous shocks to competition. Importantly, we show that performance risk and product margin act as mediating variables in the relation between supplier competition and CEO incentive intensity providing support for the theory underpinning our finding. We document that CEO compensation contracts are used as a mechanism to exploit the market dynamics of upstream industries to a firm's benefit. Our findings are economically important as suppliers provide, on average, 45 percent of the value delivered by procuring firms to the market (BEA, 2016).

Growth and Persistence of Place-Based Mortality in the United States: The Rural Mortality Penalty.

To examine 47 years of US urban and rural mortality trends at the county level, controlling for effects of education, income, poverty, and race. We obtained (1) Centers for Disease Control and Prevention WONDER (Wide-ranging ONline Data for Epidemiologic Research) data (1970-2016) on 104 million deaths; (2) US Census data on education, poverty, and race; and (3) Bureau of Economic Analysis data on income. We calculated ordinary least square regression models, including interaction models, for each year. We graphed standardized parameter estimates for 47 years. Rural-urban mortality disparities increased from the mid-1980s through 2016. We found education, race, and rurality to be strong predictors; we found strong interactions between percentage poverty and percentage rural, indicating that the largest penalty was in high-poverty, rural counties. The rural-urban mortality disparity was persistent, growing, and large when compared to other place-based disparities. The penalty had evolved into a high-poverty, rural penalty that rivaled the effects of education and exceeded the effects of race by 2016. Public Health Implications. Targeting public health programs that focus on high-poverty, rural locales is a promising strategy for addressing disparities in mortality.

Alternative User Costs, Productivity and Inequality in US Business Sectors

Using the new Bureau of Economic Analysis (BEA) Integrated Macroeconomic Accounts as well as other BEA data, we construct productivity accounts for two key sectors of the US economy: the Corporate Nonfinancial Sector (Sector 1) and the Noncorporate Nonfinancial Sector (Sector 2). Calculating user costs of capital based on, alternatively, ex post and predicted asset price inflation rates, we provide alternative estimates for capital services and Total Factor Productivity growth for the two sectors. Rates of return on assets employed are also reported for both sectors. In addition, we compare rates of return on assets employed and TFP growth rates when the land and inventory components are withdrawn from the asset base. Finally, implications for labour and capital shares from using alternative income concepts are explored.

The Labor Market Effects of Offshoring by U.S. Multinational Firms: Evidence from Changes in Global Tax Policies

Estimating the causal effect of offshoring on domestic employment is difficult because of the inherent simultaneity of multinational firms' domestic and foreign affiliate employment decisions. In this paper, we resolve this identification problem using variation in Bilateral Tax Treaties (BTTs), which reduce the effective cost of offshore activity by mitigating double taxation. We derive a panel difference-in-differences research design from a standard model of multinational firms, demonstrating the simultaneity problem and showing how to resolve it using BTTs as an instrument for offshore employment. We confirm that new treaty implementation is uncorrelated with existing employment trends, and use Bureau of Economic Analysis data on U.S. multinational firms to measure the domestic employment effects of offshore activity. Overall, we find modest positive effects of offshore activity on domestic employment. A 10 percent BTT-induced increase in affiliate employment drives a 1.8 percent increase in employment at the U.S. parent firm, with smaller effects at the industry and regional levels. Underlying these results is substantial heterogeneity based on offshoring margin and firm organizational structure. For example, increased foreign affiliate activity in vertically oriented multinational firms drives declining employment among non-multinationals in the same industry, and multinational firms opening new affiliates exhibit much smaller domestic employment growth than those expanding existing affiliates. Throughout the analysis, OLS estimates are much larger than the IV estimates, consistent with upward simultaneity bias. Overall, our results indicate that greater offshore activity raises net employment by U.S. firms, albeit with underlying job loss and reallocation of workers.

Foreign Entry into US Manufacturing by Takeovers and the Creation of New Firms

Using US Bureau of Economic Analysis data from 1988 to 2006, we investigate the relationship between foreign acquisitions and new foreign establishments (greenfields) and the comparative advantage of the investing country. Unlike previous studies, we analyze the value of assets acquired by foreign investors and assets in newly established foreign firms in manufacturing industries. We find foreign acquisitions are in industries in which the investing country has a comparative advantage but are not in industries of US comparative advantage or disadvantage. Foreign-owned newly established firms are in industries of investing country comparative advantage and US comparative disadvantage.

The complexity of outsourced services and the role of international business travel

We hypothesize that face-to-face communication between international business partners is a valuable mechanism for reducing transaction costs, even in contexts where electronic communication is pervasive. Specifically, we examine whether face-to-face interactions (as measured by international business travel) have greater impacts where transaction costs are higher, e.g., where services with greater complexity are outsourced offshore. Matching data from the Survey of International Air Travelers with Bureau of Economic Analysis data on U.S. service outsourcing, we find that international business travel leads to more outsourcing of more complex services. We further provide evidence on the differential role of international business travel by showing that: (i) business travel by managers leads to relatively more outsourcing of more complex services and (ii) business travel by non-diaspora members leads to relatively more outsourcing of more complex services.

FOREIGN ENTRY INTO U.S. SERVICE INDUSTRY BY TAKEOVERS AND THE CREATION OF NEW FIRMS

I. INTRODUCTION Even though foreign acquisitions of U.S. assets are predominantly in service sector industries, research on foreign takeovers of U.S. domestic firms has focused on manufacturing firms. As foreign takeovers and new establishments in service sector industries have grown in importance (see Figure 1), research on service sector foreign direct investment (FDI) has fallen behind in part because service FDI and trade in service sector industries are not measured as well as those in the goods producing sector (Jensen 2011). Our paper analyzes the comparative advantage characteristics of foreign takeovers and new establishments in the U.S. service sector providing an insight on service sector FDI in the United States. Economic policies on service sector industries sometimes include large restrictions on foreign investors, particularly in the areas of public utilities, transports, financial services, and wholesale/retail trade. These restrictions have been used in cases such as opposition to an acquisition of a U.S. port by investors in Dubai and refusal to ease restrictions requiring that U.S. airlines must be at least 75% owned by U.S. citizens (Golub 2009). These types of policies may be misguided especially if foreign ownership brings increases in efficiency to those firms and their industries. Moreover, foreign investments in service sector industries may boost the productivity of downstream users and upstream suppliers in manufacturing (Markusen, Rutherford, and Tarr 2005; Arnold, Javorcik, and Mattoo 2011; Javorcik and Li 2013). More research is needed to better understand FDI in U.S. service sector industries and help guide policy. [FIGURE 1 OMITTED] Previous research by Feliciano and Lipsey (2015), shows that both foreign acquisitions and new foreign establishments in manufacturing tend to be in industries of investing country's revealed comparative advantage (RCA) in exporting. Moreover, new foreign-owned establishments tend to be in industries of U.S. revealed comparative disadvantage. This suggests that foreign investors in the manufacturing sector bring intangible assets or skills that make them more competitive. The relationship between foreign takeovers and investments in new foreign establishments and RCA may be different in the service sector because the motivation for foreign investment in service sector firms is different from foreign investment in the manufacturing firms. Decisions on FDI in manufacturing are based on trade costs, coordination costs, and market size. Services are not storable, and thus the provision of some services requires geographic proximity. This feature makes direct investment in service sector necessary as opposed to cross-border trade. Bhattacharya, Patnaik, and Shah (2012) develop a model for the choice of trade and FDI in the service sector and find that, contrary to FDI in manufacturing, less productive firms may engage in FDI in the service sector. The relationship between foreign acquisitions and new foreign establishments in the service sector and the comparative advantage of the country of ultimate beneficial owner (UBO) may not be positive. We analyze data on foreign takeovers of existing U.S. firms and newly formed foreign-owned firms (greenfields) in service sector industries outside of finance, insurance, and real estate from 1998 to 2008 from the Bureau of Economic Analysis (BEA) U.S. Department of Commerce. BE A data are more complete and have more detailed information than the Thomson Financial Securities data, widely used in the study of foreign acquisitions. Unlike the Thomson Financial Securities data, BEA data include smaller not publicly traded firms, contain the value of assets acquired in all transactions, and have information on new foreign establishments. (1) To our knowledge, this is the first study to estimate a relationship between foreign takeovers and new foreign firms, and the RCA of the country of UBO in the U. …

Modeling the Ripple Effects of IT‐Based Incidents on Interdependent Economic Systems

ABSTRACTThe information technology (IT) sector is one of the most critically utilized infrastructures within the U.S. economic system. The IT sector is vulnerable to man‐made attacks and it is challenging to assess the consequences of disruptions to the production and delivery of essential IT services to other economic systems. In this paper, we developed a dynamic model based on economic input–output analysis to assess time‐varying disruptions on the IT sector over multiple periods. The model is applied in an ex post analysis of an actual denial‐of‐service (DoS) attack scenario on the IT infrastructure to estimate the consequences propagated to interdependent economic systems. The model uses Bureau of Economic Analysis data to simulate the effects of IT‐based incidents and subsequently identify the critically affected economic sectors. Key results of the case study include assessments of ripple effects to vulnerable sectors in the form of inoperability and economic loss measures. An investigation of the DoS attack in year 2000 using the proposed dynamic model revealed significant losses that are consistent with the magnitude of losses from previous studies. Furthermore, the model is capable of depicting the breakdown of losses across various economic sectors, which is a significant improvement relative to previously published results. This research also extends into a multiyear trend analysis (1999–2009) to aid in developing policies for reducing the effects of IT risks across the interdependent sectors of the U.S. economy.

Fuzzy Importance Measures for Ranking Key Interdependent Sectors Under Uncertainty

In the field of reliability engineering, several approaches have been developed to identify those components that are important to the operation of the larger interconnected system. We extend the concept of component importance measures to the study of industry criticality in a larger system of economically interdependent industry sectors that are perturbed when underlying infrastructures are disrupted. We provide measures of (i) those industries that are most vulnerable to disruptions and (ii) those industries that are most influential to cause interdependent disruptions. However, difficulties arise in the identification of critical industries when uncertainties exist in describing the relationships among sectors. This work adopts fuzzy measures to develop criticality indices, and we offer an approach to rank industries according to these fuzzy indices. Much like decision makers with the knowledge of the most critical components in a physical system, the identification of these critical industries provides decision makers with priorities for resources. We illustrate our approach with an interdependency model driven by US Bureau of Economic Analysis data to describe industry interconnectedness.

The Complexity of Outsourced Services and the Role of International Business Travel

Face-to-face communication between international business partners is a valuable mechanism for reducing transaction costs, even in contexts where electronic communication is pervasive. This paper empirically examines whether face-to-face interactions (as measured by international business travel) have greater impacts where transaction costs are higher, e.g. where services with greater complexity are outsourced offshore. Matching data from the Survey of International Air Travelers with Bureau of Economic Analysis data on US service outsourcing, we find that international business travel has a significantly positive impact on service outsourcing, and that this impact is significantly larger for outsourcing more complex services. We further provide more evidence on the role of international business travel by showing that: (a) business travel by managers leads to relatively more outsourcing; (2) business travel by non-diasporas leads to relatively more outsourcing; (3) the role of international business travel remains the same before and after the digital revolution. All these findings are supported by IV estimation where we use leisure travel or terrorism incidents as instruments for business travel.

Applying entropy econometrics to estimate data at a disaggregated spatial scale

A relatively frequent problem when cross-classified data is needed (for example region \(\times \) industry) is that only aggregate (not cross-classified) data exists. Filling the gaps by combining data from diverse sources usually requires data conciliation. Ecological inference and entropy estimation techniques can be useful tools for this type of problem. This paper tests an estimation procedure based on entropy econometrics to recover disaggregated information from more aggregated data. We use U.S. Bureau of Economic Analysis data to estimate the 2011 personal income of local areas grouped into labor market size-classes in each State. The estimation is performed blindfolded, using only the distribution of personal income across States and, for the United States as a whole, across labor market size-classes, with local employment data as an a priori proxy indicator. Official local area personal income is aggregated into labor market size-classes for each State and used as a benchmark to compare them with the estimates. The results suggest that this technique could be an efficient way of estimating information at local level when different databases of aggregated information could be combined.

THE BREAD AND PEACE MODEL: 2012 PRESIDENTIAL ELECTION POSTMORTEM

President Obama received approximately 51.5% of the two-party vote in the 2012 election. The last Bread and Peace Model forecast of Obama's vote share, based on advance estimates of 2012:quarter 3 personal income posted on October 26, 2012, by the Bureau of Economic Analysis (BEA), was 46.6%—lower than the 47.5% forecast appearing in the October issue ofPS, which was based on July 27, 2012, BEA data. The Bread and Peace Model therefore underpredicted Obama's vote by 4 to 5 percentage points, equivalent to around 2 model standard errors. The president's vote therefore benefited from a +2-sigma composite shock to Bread and Peace Model fundamentals. Figure 1 shows actual and predicted values for 2012 in perspective of incumbent vote shares at all presidential elections 1952–2012.

ORGANIZING RETAIL: IDEAS FOR LABOR'S ONGOING CHALLENGE

Building on previous research that denotes the centrality of retail trade and employment to twenty‐first‐century U.S. capitalism, this article explores the potential for union organizing within the U.S. retail sector. First, I review U.S. Census, Bureau of Labor Statistics, and Bureau of Economic Analysis data to assess where “structural power” exists for retail workers and, failing this, the extent to which “associational power” would be needed to counteract employer prerogatives. Then, I discuss the current state of retail unionism and recent organizing campaigns, from which four strategies for union growth are derived: supply‐chain leveraging, global city targeting, occupational unionism, and global unionism. Although supply‐chain leveraging appears to offer the greatest potential strength for organizing efforts, I argue that intervening factors, such as worker consciousness, union prerogatives, the extent of interunion cooperation, and specific tactics employed, may provide more immediate efficacy for other strategies.

Why are different services outsourced to different countries?

The “tradability revolution” in services has led to a dramatic expansion of offshore outsourcing of services, allowing firms to take advantage of lower production costs in foreign countries. However, production costs alone cannot explain the location determinants of offshore outsourcing of services. In this paper, we argue that minimizing transaction costs is also an important determinant of the location of offshore outsourcing of services. We empirically analyze characteristics of services and characteristics of foreign countries that may impact on transaction costs in an outsourcing relationship and hence determine where services will be outsourced offshore. We derive measures of service characteristics – routineness, complexity and interactiveness – based on the tasks required to provide them. Further, we posit that there are interaction effects between service and country characteristics. Using Bureau of Economic Analysis data on US service outsourcing across 11 types of services to 31 countries between 1992 and 2005, we find that: (1) services that are more routine, less complex or less interactive are outsourced more to foreign countries; (2) services are outsourced more to countries with higher institutional quality and greater cultural proximity; (3) non-routine, complex and interactive services are outsourced relatively more to countries with a better institutional quality.

A Risk‐Based Approach for Identifying Key Economic and Infrastructure Systems

This article introduces approaches for identifying key interdependent infrastructure sectors based on the inventory dynamic inoperability input-output model, which integrates an inventory model and a risk-based interdependency model. An identification of such key sectors narrows a policymaker's focus on sectors providing most impact and receiving most impact from inventory-caused delays in inoperability resulting from disruptive events. A case study illustrates the practical insights of the key sector approaches derived from a value of workforce-centered production inoperability from Bureau of Economic Analysis data.

The structure of multinational activity: evidence from Germany

Recent empirical studies of the determinants of multinational activity across countries have found overwhelming support for a horizontal rather than a vertical model of Foreign Direct Investment (FDI). The majority of these studies use data either originating in or targeted at the US. This article presents evidence from a dataset of German inward and outward FDI. The dataset is similar in scope to the widely used US Bureau of Economic Analysis data, making the results comparable to those from previous studies. In addition, a new empirical specification is employed that avoids some of the problems that have plagued these studies. The results provide little indication of vertical multinationals. FDI happens largely between similarly endowed countries. Multinational firms originate in skilled-labour abundant countries, although the evidence is mixed on whether they are also small. A novel result is that German firms invest disproportionately in other European countries, while the reverse is not true.