Explaining German outward FDI in the EU: a reassessment using Bayesian model averaging and GLM estimators

The last decades have witnessed an increasing interest in FDI and the process of production fragmentation. This has been particularly important for Germany as the core of the European Union (EU) production hub. This paper provides a comprehen- sive empirical evidence of the determinants of German outward FDI in the EU for the period 1996-2012. First, we extend previous BMA analysis developed by Camarero et al. (2019) by including country-pair-fixed effects to select the appropriate set of vari- ables. Second, we compare several estimation methods in their multiplicative form, namely, four versions of the Generalized Linear Model (GLM). The results of the em- pirical application indicate that Gamma Pseudo Maximum Likelihood (GPML) is the best performing estimator. Furthermore, our results point to horizontal-ness as the pri- mary strategy for German investment in core EU countries while vertical-ness seems to prevail in peripheral EU countries