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
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.
free text keywords: General Economics, Econometrics and Finance, HB
Related Organizations
31 references, page 1 of 3

Agosin, M. R. Machado, R., (2005), “Foreign Investment in Developing Countries: Does it Crowd In Domestic Investment?”, Oxford Development Studies, 33(2), 149-162.

Agosin, M. R. and Mayer. M., (2000), “Foreign Investment in Developing Countries: Does It Crowd in Domestic Investment?”, UNCTAD Discussion Paper, 146.

Aitken, B. and Harrison. A.., (1999), “Do Domestic Firms Benefit from Foreign Direct Investment? Evidence from Venezuela”, American Economic Review, 89 (3), 605-618.

Alguacil, M. Cuadros, A. Orts, V., (2008), “EU Enlargement and Inward FDI”, Review of Development Economics, 12(3), 594-604. [OpenAIRE]

Ang, J. B., (2009) “Do Public Investment and FDI Crowd In or Crowd Out Private Domestic Investment in Malaysia?”, Applied Economics, 41, 913-919.

Apergis, N. Katrakilidis, C. and Tabakiss N.M., (2006), “Dynamic Linkages between FDI Inflows and Domestic Investment: A Panel Co-integration Approach”, Atlantic Economic Journal, 34, 385-394. [OpenAIRE]

Arellano, M. and Bond, S., (1991), “Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations”, The Review of Economic Studies, 58 (2), 277-297.

Baum, C. F., Schaffer, M. E. and Stillman, S. (2002), “Instrumental Variables and GMM: Estimation and Testing”, Boston College, Economics Working Paper 545.

Blomström, M. Kokko, A., (1998), “Multinational Corporations and Spillovers”, Journal of Economic Surveys, 12 (3), 247-277 [OpenAIRE]

Bosworth, B. Collins, S. M., (1999), “Capital Flows to Developing Economies: Implications for Saving and Investment”, Brookings Papers on Economic Activity, 1, 143-180 [OpenAIRE]

Calderón, C. Loayza, N. Servén, L., (2004), “Greenfield Foreign Direct Investment and Mergers and Aquisitions: Feedback and Macroeconomic Effects”, World Bank Policy, Research Working Paper 3192. [OpenAIRE]

Cecchini, L. and Lai-Tong C., (2008), “The Links Between Openness and Productivity in Mediterranean Countries”, Applied Economics, 40, 685-697. [OpenAIRE]

De Backer, K. and Sleuwaegen, L., (2003), “Does Foreign Direct Investment Crowd Out Domestic Entrepreneurship?”, Review of Industrial Organization, Katholieke Universiteit Leuven.

De Mello, L. R., (1999), “Foreign Direct Investment-led Growth: Evidence from Time Series and Panel Data”, Oxford Economic Papers, 51, 133-151.

Faeth, I., (2006), “Consequences of FDI in Australia - Causal Links between FDI, Domestic Investment, Economic Growth and Trade”, The University of Melbourne Department of Economics, Research Paper, No 977.

31 references, page 1 of 3
Powered by OpenAIRE Research Graph
Any information missing or wrong?Report an Issue