US county-level determinants of inbound FDI: evidence from a two-step modified count data model

We employ a two-step modified count data model to determine the county-level attributes that are conducive to attracting new foreign plants. Our estimation results indicate that previous counts of foreign direct investment, market size and accessibility, and land area are positively related to Foreign Direct Investment (FDI) occurrences; while higher input costs deter new foreign firm entry. Contrary to anecdotal evidence, our results suggest that stringent environmental regulations do not have a negative impact on FDI inflows. These findings have significant implications for policymakers, as flows of FDI are expected to increase dramatically given the economic integration of our global economy.