A Meta-Analysis of the Robustness of Market Size and Labour Cost Determinants of FDI

This paper applies a meta-regression analysis to systematically summarise, integrate and synthesise the results of empirical studies that include market size and labour costs as determinants of FDI. Random effects panel estimation is employed separately for the sample of primary studies that use OLS estimation to analyse the effect of market size and labour costs on FDI and for the sample of primary studies that employ discrete choice models to estimate the effect of market size and labour costs on FDI. A number of factors related to model specifications, dataset characteristics and methodologies in the primary studies explain the variation in the estimated t-statistics of the effect of market size and labour costs on FDI across the studies. Most tests for publication bias indicate that the empirical literature on the effect of market size on FDI favours positive estimates while empirical literature on the effect of labour costs on FDI favours negative estimates. None of the literature, however, favours statistical significance.