Does foreign direct investment crowd in or crowd out domestic investment? : evidence from the European Union
Pilbeam, K. & Oboleviciute, N. (2012). Does foreign direct investment crowd in or crowd out domestic investment? : evidence from the European Union. The journal of economic asymmetries, 9(1), pp. 89-104. doi: 10.1016/j.jeca.2012.01.005
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
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.
| Publication Type: | Article |
|---|---|
| Publisher Keywords: | Foreign direct investment, Domestic investment, European Union |
| Subjects: | H Social Sciences > HB Economic Theory |
| Departments: | School of Policy & Global Affairs > Economics |
| SWORD Depositor: |
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