Foreign direct investment and domestic investment in the host country: evidence from panel study

Citation data:

Applied Economics, ISSN: 0003-6846, Vol: 42, Issue: 29, Page: 3711-3721

Publication Year:
2010
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Repository URL:
https://epublications.marquette.edu/econ_fac/106
DOI:
10.1080/00036840802314580
Author(s):
Wang, Miao
Publisher(s):
Informa UK Limited; Taylor & Francis (Routledge); e-Publications@Marquette
Tags:
Economics, Econometrics and Finance; Economics
article description
This article examines the impact of inward Foreign Direct Investment (FDI) on host countries' domestic investment. Utilizing data from 50 countries over the period of 1970 to 2004, we find that inward FDI has a negative contemporaneous effect on domestic investment, while the cumulative effect of FDI over time tends to be positive. In addition, we separately study FDI in Developed Countries (DCs) and Less Developed Countries (LDCs). The effect of contemporaneous FDI on domestic investment is negative in DCs, and the cumulative effect of FDI is neutral. Strong evidence suggests that the contemporaneous effect of FDI on domestic investment is neutral in LDCs, while the cumulative effect of FDI is positive. © 2010 Taylor & Francis.