The impact of the single market programme on the locational determinants of US manufacturing affiliates: An econometric analysis

Abstract:

This article analyses the impact of the single market programme (SMP) on the locational determinants of US foreign direct investment (FDI) in the manufacturing sector. The econometric model covers the period 1978-95, a key period in the development of the European single market. As the process of regional integration deepens, some authors have predicted that firms will become more sensitive to factorbased differences (e.g. labour costs) between Member States, and less sensitive to changes in market conditions in the host country. This article finds no evidence of this phenomenon - variables related to the demand side (size and growth of GDP) continue to be the most important determinants of FDI inflows.