Third-country FTA network exposure and bilateral FDI

This paper examines how a host country’s exposure to the global free trade agreement (FTA) network relates to inward bilateral foreign direct investment (FDI). I construct two host-year exposure measures from an annual FTA network using GDP-weighted degree centrality: hub proximity exposure (HPE), capturing proximity to nearby hubs, and partner-hub exposure (PHE), capturing the centrality of a host’s FTA partners. Using bilateral FDI data from the Multinational Revenue, Employment, and Investment Database for 2010–2021, I estimate PPML gravity models with high-dimensional fixed effects. The results show that HPE is positively associated with FDI entry (the establishment of new foreign affiliates), while PHE is negatively associated with greenfield entry and post-entry affiliate outcomes.