, Volume 2, Issue 3, pp 305–333 | Cite as

General equilibrium long-run determinants for Spanish FDI: a spatial panel data approach

  • Jaime Martínez-MartínEmail author
Open Access
Original Article


While general equilibrium theories of trade stress the role of third-country effects, little work has been done in the empirical foreign direct investment (FDI) literature to test such spatial linkages. This paper aims to provide further insights into long-run determinants of Spanish FDI by considering not only bilateral but also spatially weighted third-country determinants. The few studies carried out so far have focused on FDI flows in a limited number of countries. However, Spanish FDI outflows have risen dramatically since 1995 and today account for a substantial part of global FDI. Therefore, we estimate recently developed spatial panel data models by maximum likelihood (ML) procedures for Spanish outflows (1993–2004) to top-50 host countries. After controlling for unobservable effects, we find that spatial interdependence matters and provide evidence consistent with new economic geography theories of agglomeration, mainly due to complex (vertical) FDI motivations. Spatial error models estimations also provide illuminating results regarding the transmission mechanism of shocks.


Foreign direct investment Spatial econometrics Panel data 

JEL Classification (2000)

F21 F23 C31 C33 



I am extremely grateful to Rosina Moreno, Ferdinand Paraguas, Charles Plagin and J.Paul Elhorst for their replies to my inquiries, and the seminar participants at the 2007 European Regional Science Association Summer Institute at the University of Bratislava for their comments and suggestions. I owe my gratitude as well to two anonymous referees for valuable comments that substantially improved the analysis of this paper. Special thanks to Enrique López-Bazo for his invaluable advice. All errors or omissions are my sole responsibility.


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© The Author(s) 2011

This article is published under license to BioMed Central Ltd. Open Access This article is distributed under the terms of the Creative Commons Attribution License which permits any use, distribution and reproduction in any medium, provided the original author(s) and source are credited.

Authors and Affiliations

  1. 1.AQR-IREA Research GroupUniversitat de Barcelona and BBVA ResearchBarcelonaSpain

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