Len J. Trevino

MARKET REFORM AND FOREIGN DIRECT INVESTMENT IN LATIN AMERICA: Evidence from an Error Correction Model

This study models dollar values of foreign direct investment (FDI) inflows to conditions in seven Latin American countries (Argentina, Brazil, Chile, Colombia, Mexico, Peru, and Venezuela) during the 1988-1992 period. Although much research on FDI has used time series data to explain inward or outward flows, two things set this study apart. First, this study includes market reforms as independent variables. Second, this study uses newer time series econometric tools (unit root test and cointegration analysis) to correct for a spurious regression. Our model is robust, explaining 79.4 percent of variation. We found three independent variables (size of current account deficit, size of GDP, and value of privatization less FDI in privatized companies) to be significant. Although we found directional support for three other independent variables (degree of capital market liberalization, low inflation rate, and depreciation of the real exchange rate), none of these proved significant.

The role of export processing zones for host countries and multinationals: a mutually beneficial relationship?

This paper examines export processing zones (EPZs) and the reasons behind their limited success in the development of host countries’ economies, especially in terms of employment, technology transfer, and foreign earnings. It is posited that (1) the extent to which host governments derive net benefits from EPZs is a function of the location-specific advantages they provide; net benefits to the host country increase as location-specific advantages increase; (2) net benefits tend to decrease at any given level of location-specific advantages as the number of countries offering equivalent advantages increases; (3) host countries’ net benefits are generally higher when EPZ operations are not insulated from the domestic economy, but this policy can be risky; and (4) there is little difference between EPZ-related foreign direct investment (FDI) and more traditional forms of FDI when the EPZ is not insulated from the domestic economy.

An empirical assessment of the preconditions of Japanese manufacturing foreign direct investment in the United States

An Empirical Assessment of the Preconditions of Japanese Manufacturing Foreign Direct Investment in the United States. — This study undertook a multivariate regression analysis of Japanese foreign direct investment in the US (FDIUS), based on firm- and industry-specific data. Firm size was a positive and significant explanatory variable of firms’ completed transactions as well as their additions to investment value. Firms’ overall profit was a positive and significant indicator of firms’ addition to investment value, but not their completed transactions. Firms’ return on assets was generally a positive, albeit insignificant indicator of FDIUS. Three industry-specific variables (prior exports to the US, industry concentration, and technological intensity) were examined and all were positive but insignificant indicators of FDIUS.ZusammenfassungEine empirische Überprüfung der Determinanten japanischer Direktinvestitionen im gewerblichen Sektor der Vereinigten Staaten. — Der Aufsatz enthält eine multivariate Regressionsanalyse japanischer Direktinvestitionen in den USA (FDIUS) auf der Grundlage firmen- und industriespezifischer Daten. Die Firmengröße erwies sich als eine positive und signifikante erklärende Variable für die Anzahl der von den Finnen abgeschlossenen Investitionstransaktionen und für den Wert der von den Firmen getätigten Investitionen. Der Gesamtgewinn der Firmen war ein positiver und signifikanter Indikator für den Beitrag der Finnen zum Wert der Investitionen, nicht aber die Anzahl der von ihnen abgeschlossenen Investitionstransaktionen. Die Gesamtkapitalrentabilität der Firmen war im allgemeinen positiv, wenn auch nicht signifikant korreliert mit FDIUS. Das gleiche gilt für drei untersuchte industriespezifische Variable (frühere Exporte in die USA, Konzentrationsgrad der Industrie und technologische Intensität).

FDI theory and foreign direct investment in the United States: a comparison of investors and non-investors

This study used discriminant function analysis on a sample of 240 non-US firms to determine if they could be correctly classified as direct investors or non-investors in the United States for each year during the five year period 1984-1988. Results were robust, correctly classifying 72.81% of all firms (5-year average). Specifically, investors were larger and more profitable than non-investors. They came from industries with higher exports to the United States, and which spend more on research and development. Unexpectedly, prior rates of industry export growth to the United States and global industry concentration did not discriminate between investors and non-investors.

Is there gender discrimination in named professorships? An econometric analysis of economics departments in the US South

This study examines the correlates of the probability that an individual academician holds a named professorship. Named professorships, like other positions within an organization, are determined by a mixture of market and non-market forces. Thus, both merit (both past and expected future productivity) and discrimination may play a role. Regression results and Blinder–Oaxaca decomposition tests presented here support a conclusion of gender discrimination in the named professorship process at American institutions of higher education. Specifically, it is found that gender discrimination results in a 7.6 percentage point disadvantage for females (relative to males) regarding the likelihood of holding a named professorship in economics.

Politicians as utility maximizing agents: Public choice and the British National Election of 1945

Public choice theory describes politicians as expected utility maximizing agents who are primarily concerned with their own election prospects. In a fashion similar to Anderson and Tollison, who showed that US President Abraham Lincoln manipulated the military vote in the US Presidential election of 1864, this note presents historical accounts of Winston Churchill’s efforts (desire) to suppress the overall military vote in the British National Election of 1945. The anecdotal evidence and election simulations presented suggest that Churchill’s expected utility maximization suppression strategy was consistent with public choice tenets. As such, the public choice interpretation of British political history presented here adds further to political‐economic models of legislator/executive behavior.

The bureaucracy of murder: empirical evidence

In detailing the crimes against humanity committed by the Nazi regime before and during the Second World War, Breton and Wintrobe (1986) Breton and Wintrobe describe the Nazi bureaucracy as a flexible microstructure that zealously carried out the “Final Solution” to the “Jewish question”. In this model of bureaucracy, superiors accomplish their aims not by dictating rigid top‐down orders to passive subordinates, but by allowing competition among parts of the bureaucracy and trading “informal services” for “informal payments” over time. The present research adds to the Breton‐Wintrobe argument by presenting anecdotal/empirical evidence showing how the murder of 6 million Jews was carried out in a flexible organization, wherein subordinates devised creative solutions to the “Jewish question”. Also provides evidence detailing how the quid pro quo operation resulted in dramatic payoffs for those subordinates proffering the most creative and/or efficient solutions.

The allocation of death in the Salem witch trials: a public choice perspective

World folklore and history are replete with examples that involve economics principles. The present note builds upon other published work by providing an empirical public choice analysis of the Salem witch trials of 1692. Our analysis suggests that the pattern of accusations during this episode was non‐random, and works to support the public choice argument that Reverend Parris and the other ministers used the witchcraft hysteria as a “crusade” against residents of east Salem village because they supported – against the wishes of Parris and the west Salem villagers – economic and political alignment with the neighboring Salem town.

Fugitives as fish: bounty hunting and exploitation of the commons

Abstract This note examines the property rights aspects of bounty hunting, and suggests that fugitives within the criminal justice system represent a common property resource. Economic theory might predict that this resource would be over exploited, perhaps resulting in industry profits being driven to zero. It is argued, however, that, in addition to regulation, recently developed concepts regarding uncertainty and heterogeneity of exploitation skills likely work to limit exploitation effort in bounty hunting. The anecdotal evidence and inference provided in this note make for a compelling pedagogical device for principles and intermediate economics students.

Building Institutions and Foreign Direct Investment in Latin America

ABSTRACT This exploratory study of inward foreign direct investment-FDI-in Latin America examines the extent to which institution building1 has occurred in seven Latin American countries and, concomitantly, the impact it has had on increasing inward FDI in the region. Elements of institution building examined in the present study include political risk, capital markets liberalization, and privatization. These variables are modeled by individual country, thus facilitating cross-country comparisons. In six of the seven countries, institutional reform, as measured by capital account liberalization and/or political risk reform, is a statistically significant determinant of FDI over time. Results for privatization vary more significantly by country. In several cases (e.g., Brazil, Chile, Columbia and Mexico), an anomalous result is found regarding the relationship between privatization and FDI over time. For Argentina, Peru, and Venezuela, privatization is positively related to FDI; in the case of Peru, privatization is only marginally significant, while it is highly significant for Venezuela. The results suggest that, for Venezuela, both privatization of commercial enterprise and other institutional reforms, such as current account practice reform and general political risk reform, have been important determinants of FDI inflows. RESUMEN. Este estudio exploratorio sobre la inversión extranjera directa-IED-en Latinoamérica analiza el alcance que dichas instituciones han alcanzado en siete países latinoamericanos y, concomitantemente, el impacto que han tenido sobre el aumento de la IED en la región. Los elementos de la constitución institucional analizados en este estudio incluyen el riesgo político, mercados de capital, liberalización y privatización. Estas variables han sido indicadas por país lo que facilita, por ende, la comparación de lo que ocurren entre los diversos países. En seis de los siete países las reformas institucionales, tal cual fueron medidas por la liberalización de las cuentas de capital y/o el riesgo político son, a lo largo del tiempo, un determinante estadístico de la IED. Los resultados de la privatización varían más notoriamente por país. En muchos casos (Ej.: Brasil, Chile, Colombia y México), los resultados encontrados son anómalos con respecto a la relación que existe entre la privatización y la IED. En el caso de Argentina, Perú y Venezuela, la privatización está relacionada positivamente a la IED; mientras que en el Perú, la privatización apenas tiene una importancia marginal, y es mucho más relevante para Venezuela. Los resultados obtenidos sugieren que, para Venezuela, tanto la privatización de las empresas comerciales como otras reformas institucionales, por ejemplo la práctica de la reforma de las cuentas de cuentas corrientes y la reforma general del riesgo político, han jugado un papel preponderante sobre las entradas de la IED. RESUMO. Este estudo exploratório sobre investimento direto estrangeiro para dentro-FDI-na América Latina examina em que medida o estabelecimento de instituições vem ocorrendo em sete países latino-americanos e, concomitantemente, o impacto que o mesmo vem causando no crescimento do FDI para dentro na região. Elementos da constituição de instituições examinados neste estudo incluem risco político, liberalização de mercados de capital e privatização. Estas variáveis foram consideradas para cada país individualmente, facilitando assim comparações interpaíses. Em seis dos sete países, a reforma institucional, mensurada pela existência de liberalização do capital e/ou reforma política, é um fator determinante estatisticamente significante da existência de FDI ao longo do tempo. Os resultados relativos à privatização variam mais significativamente de país para país. Em vários casos (por exemplo, Brasil, Chile, Colômbia e México), um resultado anômalo foi encontrado no que diz respeito à relação existente entre privatização e FDI ao longo do tempo. Na Argentina, no Peru e na Venezuela a privatização está positivamente relacionada ao FDI; no caso do Peru, a privatização é apenas marginalmente significante, enquanto que no da Venezuela é altamente significante. Os resultados sugerem que, para a Venezuela, tanto a privatização de empresas comerciais quanto outras reformas institucionais, tais como reforma bancária e reforma política em geral, têm sido importantes fatores determinantes dos fluxos de entrada de FDI.