Graduation Year

2019

Document Type

Honors Thesis

Degree Name

Bachelor of Arts

Department

Economics and Global Studies

Program or Major

Economics

Faculty Advisor

Demetri Kantarelis

Abstract

This paper examines whether Net Foreign Direct Investment between the USA and its major trading partners (USNFDI) is affected by US Net Competitiveness (USNC), US Net Economic Freedom (USEF) and US Net Ease of Doing Business (USNE)(*). Through the use of panel data methodology, the hypothesis that US NFDI is positively affected by USNC, USEF and USNE was tested with data from the Global Competitiveness Report (World Economic Forum), the Index of Economic Freedom (Heritage Foundation), the Ease of Doing Business Index (World Bank) and the World Fact Book (CIA). It was found that all three independent variables had, as predicted, a positive effect on USNFDI, but only USNC was statistically significant. These findings suggest that rising net competitiveness in the US, between it and its trading partners, significantly contributes to higher USNFDI. As pointed out in the paper, NFDI must be judged on the basis of equimarginal welfare implications as they relate to the distribution of bilateral benefits.

(*) Definitions:

i = trading partner

USNFDI = (US incoming FDI from country i) - (US outgoing FDI to country i)

USNC = (US’s Competitiveness Rank) - (i’s Competitiveness Rank)

USEF = (US’s Freedom Rank) - (i’s Freedom Rank)

USNE = (US’s Ease of Doing Business Rank) - (i’s Ease of doing Business Rank)

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