International Investment in the United States Insurance Industry
Abstract
The purpose of this paper is to analyse and measure which factors that are the determinants of FDI in insurance services in the US over the period from 1987 to 1998 using OLS regressions. The results indicate that the relative wage between the US and the source countries and the variable of manufacturing in the US are the major determinants of FDI in insurance services in the US. Furthermore, the empirical results indicate that the higher the wage rate in the US relative to the source countries, the lower the FDI in insurance services in the US. It also indicates that FDI in insurance services is positively affected by the contribution of manufacturing expansion. Hence, the higher growth rate in FDI in manufacturing sectors in the US, the higher the expansion rate in FDI in insurance services in the US and the relationship between the US and the source countries is become more important.
1. Introduction
The integration of the global economy has strengthened the international integration of goods, technology, labour and capital. This process of cross-border restrictions eliminations on international capital flows has increased the growth of foreign direct investment (FDI) activity. Many countries make every effort to attract FDI because it will bring a substantial growth to their economy, in addition to its function as the principal vehicle of international capital movement. There is a widely shared view that FDI accelerates host countries¡¦ growth by augmenting domestic savings and investment, helping transfer of technology from the¡¨leaders¡¨, increasing competition in the host country¡¦s domestic market, increasing exports, earning foreign exchange and imparting several other types of positive externalities to the economy at large.
Corresponding to the above, since early 1980s, according to the World Investment Report (United Nations, 1994), worldwide flows of foreign direct investment have grown at unprecedented rates to reach a total outflow
The purpose of this paper is to analyse and measure which factors that are the determinants of FDI in insurance services in the US over the period from 1987 to 1998 using OLS regressions. The results indicate that the relative wage between the US and the source countries and the variable of manufacturing in the US are the major determinants of FDI in insurance services in the US. Furthermore, the empirical results indicate that the higher the wage rate in the US relative to the source countries, the lower the FDI in insurance services in the US. It also indicates that FDI in insurance services is positively affected by the contribution of manufacturing expansion. Hence, the higher growth rate in FDI in manufacturing sectors in the US, the higher the expansion rate in FDI in insurance services in the US and the relationship between the US and the source countries is become more important.
1. Introduction
The integration of the global economy has strengthened the international integration of goods, technology, labour and capital. This process of cross-border restrictions eliminations on international capital flows has increased the growth of foreign direct investment (FDI) activity. Many countries make every effort to attract FDI because it will bring a substantial growth to their economy, in addition to its function as the principal vehicle of international capital movement. There is a widely shared view that FDI accelerates host countries¡¦ growth by augmenting domestic savings and investment, helping transfer of technology from the¡¨leaders¡¨, increasing competition in the host country¡¦s domestic market, increasing exports, earning foreign exchange and imparting several other types of positive externalities to the economy at large.
Corresponding to the above, since early 1980s, according to the World Investment Report (United Nations, 1994), worldwide flows of foreign direct investment have grown at unprecedented rates to reach a total outflow
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