publication . Article . 2012

Does Foreign Direct Investment Crowd In or Crowd Out Domestic Investment? Evidence from the European Union

Pilbeam, K.; Oboleviciute, N.;
Open Access
  • Published: 01 Jan 2012 Journal: The Journal of Economic Asymmetries, volume 9, pages 89-104 (issn: 1703-4949, Copyright policy)
  • Publisher: Elsevier BV
  • Country: United Kingdom
Abstract
This paper investigates whether foreign direct investment crowds in or crowds out domestic investment in the European Union. We use the theoretical model developed by Agosin and Machado (2005) and apply the Arellano-Bond\ud generalized method of moments (GMM) to capture macroeconomic externalities. Our data analysis covers 26 of the 27 EU countries (excluding Luxembourg) for the period 1990-2008. Our main conclusion is that FDI has no negative impact on domestic investment in the new EU member states over the longer run. By contrast, for the older EU14 member states we detect a significant crowding out effect of FDI on domestic investment.
Subjects
free text keywords: General Economics, Econometrics and Finance, HB
Related Organizations
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