I am extremely stuck on trying to think of an instrument for the location of FDI within a country. The instrument must be correlated with foreign firms, but not correlated with domestically-owned firms.
Note: there is no Government policy I can exploit.
Any suggestions, papers, anything at all would be greatly appreciated.
My dependent variable is the log of house price, and my regressors of interest are 1) the log of distance to FDI 2) the log of job creation at the particular firm.
Isolating the impact of FDI on house prices will be difficult, given the presence of domestically-owned investments in close proximity.