International Trade Working Paper

The International Trade Working Paper series promptly documents and disseminates reviews, analytical work and think-pieces to facilitate the exchange of ideas and to stimulate debates and discussions on issues that are of interest to developing countries in general and Commonwealth members in particular. The issues considered in the papers may be evolving in nature, leading to further work and refinement at a later stage.


Commonwealth Greenfield Investment

Stylised Facts and the Effect of Commonwealth Membership

This paper examines the effect of Commonwealth membership on greenfield investment, using bilateral data in a structural gravity model. Estimates suggest that Commonwealth membership is associated with 19 per cent more greenfield investment, but this study finds this is effect to be only weakly significant. It finds that the presence of common legal origins is a statistically significant determinant of both intra- and extra-Commonwealth greenfield investment, along with membership of goods trade agreements and common colonial antecedents for the latter: meanwhile, geography has a negative bearing on both. No single factor consistently explains the Commonwealth's greenfield investment into the rest of the world, though the effect of geography and bilateral investment treaties is negative.


Keywords: greenfield investment, foreign direct investment, Commonwealth effect
JEL: P45: Economic Systems / Other Economic Systems / Other Economic Systems: International Trade, Finance, Investment and Aid; F10: International Economics / Trade / Trade: General; F21: International Economics / International Factor Movements and International Business / International Investment; Long-term Capital Movements
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