| Using a fixed-effects panel data approach, FDI flows of 22 OECD countries are explained by gravity equations over the period 1991-2001. It is distinguished between all available observations, Intra-EU25 observations only, and observations not belonging to the EU25 area in order to control for EU-specific effects. Regressions are repeated with exports as dependent variable in order to capture diverging influences for trade flows. Changes in total market size and relative market size are important factors that lead both FDI and exports in the same direction. However, relative market size is only significant in the FDI equation when variation between the EU25 area and other investment is taken into account, thus indicating a concentration of FDI within... |
