Raymond MacDermott, Ph.D.

Working Papers

  • A Panel Study of the Pollution-Haven Hypothesis
    revise and resubmit at the Global Economy Journal

    This paper tests the pollution-haven hypothesis.  We apply a fixed-effects variation of the gravity model to panel data to investigate what relationship, if any, exists between environmental regulations and FDI.  The data set focuses on bilateral flows of aggregated foreign direct investment between the 26 OECD countries from 1982 to 1997.  We find strong evidence in support of the pollution-haven hypothesis.  In other words, firms do, in fact, seek out countries with weaker environmental regulations for production.  In addition, FDI appears to rise with country size (both host and source) but falls with distance.  Contrary to expectations, FDI is not influenced by interest rates and wages.

  • Grade Dropping, Strategic Behavior, and Student Satisficing
    under review at the Journal of Financial Education

    An extensive database of exam scores is studied to determine the effects of a grading policy that drops the lowest exam score. We find evidence that some students engage in strategic behavior, by understudying for one of the exams. We also find evidence that many students “satisfice”, showing how a large percentage of students passed up an expected improvement in their course grade. We find that the probability a student will choose to complete an optional final exam is inversely related to their grade going into the final. Further, the likelihood of a student completing the final exam rises with the spread between prior exam scores and falls with the points needed to raise their course grade.

  • A Panel Study of Foreign Direct Investment and Trade

    The relationship between trade and multinational activity is a basic issue in international economics as well as a controversial mainstream issue.  Does greater foreign direct investment abroad displace domestic production and exports?  How do inflows of FDI influence imports?  This study uses bilateral panel data of trade and FDI flows between 28 OECD countries and 55 partner countries (27 non-OECD countries along with 28 OECD countries) from 1980 to 1997.  A fixed-effects gravity model of trade is applied to the data.  The evidence confirms the conclusion found in earlier country-focused studies - trade and foreign direct investment are complements rather than substitutes, as much of the earlier research found.  However, this relationship is only found for developed countries interacting with other developed countries.  It fails to hold for developed countries interacting with developing countries.

  • Student Perceptions of Current and Ideal Learning and Grade Orientations in Economics Courses
    with Lester Hadsell and Mary Ellen Mallia

    Research in educational psychology has shown that students have some amount of both a “grade orientation” and a “learning orientation,” or, more generally, performance and mastery approaches, respectively. A mastery approach is associated with higher levels of cognitive engagement, more effort and persistence, and better performance compared to students with a performance approach. This study documents grade and learning orientations in economics students and compares these to students’ ideal or preferred orientation.

  • Immigration and Foreign Direct Investment with James Bang

    There is an ongoing debate within economics as to the relationship between the flows of immigrants and the flow of foreign direct investment. One camp argues that these flows are substitutes. That is, as foreign direct investment flows in to a country, say from the United States to Mexico, immigration flows in the opposite direction should fall. There are those who believe this relationship fails to hold. They believe that as FDI flows in to a country, the outward flow of immigrants will actually rise.
    The OECD makes bilateral data available on both immigration and foreign direct investment flows. We will utilize this data in the hopes of confirming either the complementary or substitutive relationship between the flows of labor and capital.

  • The Effects of the EMU on FDI through the Elimination of Exchange Rate Volatility

    This study investigates the relationship between foreign direct investment and fluctuations in and volatility of the nominal exchange rate.  A fixed-effects variation of the gravity model is applied to panel data of 55 countries from 1980 to 1997.  Weak host currencies and greater exchange rate volatility are found to discourage FDI flows.  As a result, participation in exchange rate policies such as dollarization and currency unions would likely increase flows of FDI as they eliminate nominal exchange rate uncertainty.

  • The Effect of Natural Disaster on International Trade

    If a country is hit by a large-scale natural disaster, the economy will certainly be negatively affected.  Using earthquake data from the U.S. Geological Survey as the basis for analysis, this paper researches the impact such a disaster potentially has on trade and the economy.  On the one hand, domestic production would fall causing imports to rise and exports to fall.  On the other hand, greater demand due to the relief effort would cause imports to rise, as relief comes in from abroad, while domestic production is redirected from export to local consumption.  As a result, we expect an earthquake would cause the trade deficit to rise.