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

Keith Pilbeam and Neringa Oboleviciute

The Journal of Economic Asymmetries, 2012, vol. 9, issue 1, 89-104

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.

Keywords: F21; F23; F36; F43; Foreign direct investment; Domestic investment; European Union (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1703494915302309
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:joecas:v:9:y:2012:i:1:p:89-104

DOI: 10.1016/j.jeca.2012.01.005

Access Statistics for this article

The Journal of Economic Asymmetries is currently edited by A.G. Malliaris

More articles in The Journal of Economic Asymmetries from Elsevier
Bibliographic data for series maintained by Catherine Liu ().