CAPITAL IN FLIGHT: JAPANESE INVESTMENT AND JAPANESE AIR SERVICE IN THE UNITED STATES DURING THE 1980S

The relationship between Japanese air service to the U.S. and Japanese direct investment in the U.S. is studied. On theoretical grounds, it is argued that regions receiving more air service to Japan could receive more direct investment because (1) greater accessibility to Japan facilitates freight and passenger transport between the two countries, and these may be important inputs to production for many Japanese ventures in the U.S. (2) flights between the U.S. and Japan generate flows of information which are geographically biased toward regions from which the flights originate, creating greater awareness of investment opportunities in these regions on the part of Japanese investors. Results suggest a linear relationship between per capita investment and the total flights, supporting the information bias theory but not the accessibility theory.