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Motivated by the 留学生论文代写macroeconomic fluctuations and policy regime switches frequently observed in developingcountries, this paper provides cross country-industry evidence on the links between a host country’smacro risks and foreign direct investment (FDI) activities. For each industry I measure vertical FDI share asa ratio of exports to a parent country relative to local sales by foreign affiliates. Using a panel sample from1989 to 1999, I find that FDI activities of US multinationals in industries with higher share of vertical FDIrespond disproportionately more to negative effects of macro-level demand, supply, and sovereign risks.However, when institutional quality and total FDI share of the host country are sufficiently low, the meritsof cross-industry vertical versus horizontal FDI in response to macro risks disappear. Journal of ComparativeEconomics 35 (3) (2007) 509–519. Division of Economics, Nanyang Technological University (NTU),S3-B2A-06, Singapore 639798.2007 Association for Comparative Economic Studies. Published by Elsevier Inc. All rights reserved.JEL classification: E32; F21; F23; F40; L16;

Keywords: Horizontal and vertical FDI; Institutions; Macroeconomic volatility; Multinationals

1. Overview
What is the main driving force of foreign direct investment (FDI)? This paper adds to a series of literatures studying the association between institutions, macroeconomic risks, and FDI.

In Aizenman and Marion (2004), a simple real-option model of FDI is supported by countrylevel evidence that macroeconomic volatility has larger effects on vertical FDI than horizontal FDI. Delving into the industry level, I investigate whether a priori FDI structure—vertical versus horizontal—determines the association between FDI activity and macro-level risks. If so, negative effects of risks in a host country on FDI activity ex post then not only exist but are also dependent on the share of vertical FDI across industries. Using a sample of activity by US multinationals, Table 1 reports for each industry a vertical FDI share, measured by the level exported back to US divided by local sales.2 To tabulate the numbers, it is assumed that production technology underlying the share of horizontal versus

References
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