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Do the determinants of foreign direct investment have a reverse and symmetric impact on foreign direct divestment?

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  • Alfred A. Haug

    (University of Otago)

  • Anh T. N. Nguyen

    (University of Otago)

  • P. Dorian Owen

    (University of Otago)

Abstract

Negative foreign direct investment (divestment) between countries has received little attention in international macroeconomics. This is the first country-level study to investigate whether conventional drivers of bilateral foreign direct investment (FDI) have a reverse, but symmetric, impact on foreign direct divestment (FDD). Using bilateral negative and positive FDI data between 126 countries or territories, from 2005 to 2018, we find that conventional gravity variables that have statistically significant effects on FDI, such as host and source country GDP, distance, and source-country remoteness, have similar-signed effects on FDD, rather than opposite-signed effects. Formal testing of whether coefficients on the determinants of the absolute value of divestment are equal but opposite signed to those for investment rejects this hypothesis. The view that what may lead to more FDI may impede FDD is not supported by our empirical findings.

Suggested Citation

  • Alfred A. Haug & Anh T. N. Nguyen & P. Dorian Owen, 2023. "Do the determinants of foreign direct investment have a reverse and symmetric impact on foreign direct divestment?," Empirical Economics, Springer, vol. 64(2), pages 659-680, February.
    • Handle: RePEc:spr:empeco:v:64:y:2023:i:2:d:10.1007_s00181-022-02263-z
    DOI: 10.1007/s00181-022-02263-z
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    More about this item

    Keywords

    Foreign direct divestment; Negative FDI; Gravity modelling; Poisson pseudo-maximum likelihood;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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