Publication

This paper analyzes the determinants of the location choices made by foreign investors at the district level in India to gauge the relative importance of economic geography factors, local business conditions, and the presence of previous foreign investors. We employ a discrete choice model and Poisson regressions to control for the potential violation of the assumption of Independence of Irrelevant Alternatives. We find that foreign investors strongly prefer locations where other foreign investors are. They are also attracted to industrially diverse locations and those with better infrastructure. We conclude that the concentration of FDI in a few locations could fuel regional divergence in post-reform India.