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Do All Foreign Direct Investment Inflows Benefit the Local Economy?

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  • Kostas Axarloglou
  • Mike Pournarakis

Abstract

The present study measures the impact of FDI inflows on the local economies of the US states that receive most of the FDI inflows in the country. It appears that FDI inflows in manufacturing have rather weak effects on local employment and wages in most of the states in the sample. However, these results are primarily due to the industry composition of the FDI. FDI inflows in Printing and Publishing, Transportation Equipment and Instruments have positive effects on local employment and wages, while FDI inflows in Leather and Stone/Clay/Glass have detrimental effects on local labour markets in most of the states in the sample. These findings indicate the importance of industry characteristics in evaluating the effects of FDI inflows on local communities. Also, they emphasise the need for US states to selectively target and attract FDI inflows in specific industries.

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  • Kostas Axarloglou & Mike Pournarakis, 2007. "Do All Foreign Direct Investment Inflows Benefit the Local Economy?," The World Economy, Wiley Blackwell, vol. 30(3), pages 424-445, March.
    • Handle: RePEc:bla:worlde:v:30:y:2007:i:3:p:424-445
    DOI: 10.1111/j.1467-9701.2006.00824.x
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    9. Sunde, Tafirenyika, 2022. "The impact of foreign direct investment on Namibia’s economic growth: A time series investigation," MPRA Paper 117366, University Library of Munich, Germany, revised 03 May 2023.
    10. Dao Thi Hong Nguyen, 2021. "Are local workers better‐off from foreign presence? A firm‐level panel data analysis of a service industry," Bulletin of Economic Research, Wiley Blackwell, vol. 73(2), pages 276-294, April.
    11. Adam P. Balcerzak & Miroslawa Zurek, 2011. "Foreign Direct Investment and Unemployment: VAR Analysis for Poland in the Years 1995-2009," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 3-14.
    12. KIYOTA Kozo & NAKAJIMA Kentaro & TAKIZAWA Miho, 2022. "Local Labor Market Effects of Chinese Imports and Offshoring: Evidence from Matched-Foreign Affiliate-Domestic Parent-Domestic Plant Data in Japan," Discussion papers 22013, Research Institute of Economy, Trade and Industry (RIETI).
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    14. Najeeb Muhammad Nasir & Mohammed Ziaur Rehman & Nasir Ali, 2017. "Foreign Direct Investment, Financial Development and Economic Growth," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 8(4), pages 228-239, October.
    15. Barkauskaite Aida & Naraskeviciute Violeta, 2016. "Foreign Direct Investment Impact on Economic Indicators of the Baltic Countries," Economics and Business, Sciendo, vol. 28(1), pages 61-67, April.
    16. Kurtović, Safet & Maxhuni, Nehat & Halili, Blerim & Krasniqi, Bujar, 2021. "The Asymmetric Effect of Foreign Direct Investment on the Net Average Wages of Southeastern European Countries," MPRA Paper 107924, University Library of Munich, Germany, revised 18 Apr 2021.
    17. Fabienne Fortanier & Selwyn Moons, 2011. "Foreign Investors in The Netherlands: Heterogeneous Employment and Productivity Effects," De Economist, Springer, vol. 159(4), pages 511-531, December.
    18. Enrico Marelli & Laura Resmini & Marcello Signorelli, 2014. "The Effects Of Inward Fdi On Regional Employment In Europe," Romanian Journal of Regional Science, Romanian Regional Science Association, vol. 8(1), pages 1-23, JUNE.
    19. Omar Abu Risha & Qingshi Wang & Mohammed Ismail Alhussam, 2023. "Impact of Foreign Enterprises’ Capital Inflow on Urbanization Factors: Evidence from Northeastern Cities of China," Sustainability, MDPI, vol. 15(21), pages 1-24, November.
    20. E. M. Ekanayake & Lucyna Kornecki, 2011. "Factors Affecting Inward Foreign Direct Investment Flows into the United States: Evidence from State-Level Data," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 1(3), pages 1-95.

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