We assess the targeting of foreign aid within recipient countries by employing Poisson estimations on the determinants of the World Bank's allocation of project aid at the district level in India. The evidence of needs-based location choices is very weak as long as the poverty orientation of overall commitments is taken as the yardstick. It is only for some sectors that we find stronger indications of needs-based allocation when combining sector-specific commitments with corresponding measures of need. The evidence for a merit-based allocation of World Bank aid is even weaker. We typically do not find evidence that aid allocation is affected by political patronage at the state or district level. However, the World Bank prefers districts where foreign direct investors may benefit from projects related to infrastructure.
Abstract:We empirically assess the determinants of India's FDI outflows across a large sample of host countries in the 1996-2009 period. Based on gravity model specifications, we employ Poisson pseudo maximum likelihood (PPML) estimators. Major findings include: India's outward FDI is hardly affected by motives to access raw materials or superior technologies. Market-related factors appear to have dominated the location choices of Indian direct investors. A larger Indian diaspora in the host countries attracts more FDI. Finally, it seems that Indian direct investors are relatively resilient to weak institutions and economic instability in the host countries. However, we do not find robust evidence that India provides an alternative source of FDI for countries that traditional investors tend to avoid.
Abstract:We empirically assess the determinants of India's FDI outflows across a large sample of host countries in the 1996-2009 period. Based on gravity model specifications, we employ Poisson pseudo maximum likelihood (PPML) estimators. Major findings include: India's outward FDI is hardly affected by motives to access raw materials or superior technologies. Market-related factors appear to have dominated the location choices of Indian direct investors. A larger Indian diaspora in the host countries attracts more FDI. Finally, it seems that Indian direct investors are relatively resilient to weak institutions and economic instability in the host countries. However, we do not find robust evidence that India provides an alternative source of FDI for countries that traditional investors tend to avoid.
Non-traditional source countries of FDI play an increasingly important role, notably in developing host countries. This raises the question of whether the location choices differ systematically between traditional and non-traditional source countries. We perform Logit and Poisson Pseudo Maximum Likelihood estimations to assess the determinants of bilateral FDI flows. We find that economic geography variables are more relevant for FDI from nontraditional sources. The risk aversion of non-traditional investors is not consistently weaker than that of traditional investors. Resource abundance and superior technology in the host countries represent minor pull factors of FDI from non-traditional sources.
JEL F21
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