THE REAL EXCHANGE-RATE AND FOREIGN DIRECT-INVESTMENT IN THE UNITED-STATES - RELATIVE WEALTH VS RELATIVE WAGE EFFECTS

There has been a significant correlation between U.S. inward foreign d irect investment and the United States real exchange rate since the 19 70s. In this paper we examine the determinants of four measures of inw ard foreign direct investment to the United States from seven industri al countries over the period 1979-1991. We find strong evidence that r elative wealth significantly affects U.S. inward foreign direct invest ment. We find no evidence that relative wages have a significant impac t on the determination of U.S. foreign direct investment.