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Inappropriate Pooling of Wealthy and Poor Countries in Empirical FDI Studies

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Author Info
Bruce A. Blonigen () (Department of Economics, University of Oregon)
Miao Wang () (Department of Economics, Marquette University)

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Abstract

This paper examines the question of whether less-developed countries' (LDCs') experiences with foreign direct investment (FDI) systematically different from those of developed countries (DCs). We do this by examining three types of empirical FDI studies that typically do not distinguish between LDCs and DCs in their analysis. First, we find that the underlying factors that determine the location of FDI activity across countries vary systematically across LDCs and DCs in a way that is not captured by current empirical models of FDI. Second, the effect of FDI on economic growth is one that is only supported for LDCs in the aggregate data, not DCs. Third, the evidence suggests that FDI is much less likely to crowd out (more likely to crowd in) domestic investment for LDCs than DCs.

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File URL: http://www.nber.org/papers/w10378.pdf
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Publisher Info
Paper provided by Marquette University, Department of Economics in its series Working Papers and Research with number 0903.

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Length: 31 pages
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Publication status: Published in T. Moran, E. Graham and M. Blomstrom (eds.), Does Foreign Direct Investment Promote Development? Washington, DC: Institute for International Economics, 2005, pages 221-224
Handle: RePEc:mrq:wpaper:0903

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Find related papers by JEL classification:
F2 - International Economics - - International Factor Movements and International Business
H2 - Public Economics - - Taxation, Subsidies, and Revenue
O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

References listed on IDEAS
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  2. repec:rus:hseeco:121605 is not listed on IDEAS
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    Other versions:
  7. Balasubramanyam, V N & Salisu, M & Sapsford, David, 1996. "Foreign Direct Investment and Growth in EP and IS Countries," Economic Journal, Royal Economic Society, vol. 106(434), pages 92-105, January. [Downloadable!] (restricted)
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  10. Kevin Lee & M. Hashem Pesaran & Ron Smith, 1998. "Growth Empirics: A Panel Data Approach- A Comment," The Quarterly Journal of Economics, MIT Press, vol. 113(1), pages 319-323, February. [Downloadable!] (restricted)
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  13. Yeaple, Stephen Ross, 2003. "The complex integration strategies of multinationals and cross country dependencies in the structure of foreign direct investment," Journal of International Economics, Elsevier, vol. 60(2), pages 293-314, August. [Downloadable!] (restricted)
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  17. Sala-i-Martin, Xavier, 1997. "I Just Ran Two Million Regressions," American Economic Review, American Economic Association, vol. 87(2), pages 178-83, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Jaap Bos & Mindel van de Laar, 2004. "Explaining Foreign Direct Investment in Central and Eastern Europe: an Extended Gravity Approach," DNB Working Papers 008, Netherlands Central Bank, Research Department. [Downloadable!]
    Other versions:
  2. Joshua Aizenman & Ilan Noy, 2005. "FDI and Trade – Two Way Linkages?," Working Papers 200505, University of Hawaii at Manoa, Department of Economics. [Downloadable!]
    Other versions:
  3. Clougherty, Joseph A & Grajek, Michal, 2006. "The Impact of ISO 9000 Diffusion on Trade and FDI: A New Institutional Analysis," CEPR Discussion Papers 6026, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  4. Céline Azémar & Rodolphe Desbordes & Jean-Louis Mucchielli, 2007. "Do tax sparing agreements contribute to the attraction of FDI in developing countries?," International Tax and Public Finance, Springer, vol. 14(5), pages 543-562, October. [Downloadable!] (restricted)
    Other versions:
  5. Harding, Torfinn & Smarzynska Javorcik, Beata, 2007. "Developing Economies and International Investors: Do Investment Promotion Agencies Bring Them Together?," CEPR Discussion Papers 6418, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  6. Gnanaraj Chellaraj & Keith E. Maskus & Aaditya Mattoo, 2009. "Labor Skills and Foreign Direct Investment in a Dynamic Economy: Estimating the Knowledge-Capital Model for Singapore," Economics Study Area Working Papers 100, East-West Center, Economics Study Area. [Downloadable!]
  7. George Zodrow, 2006. "Capital Mobility and Source-Based Taxation of Capital Income in Small Open Economies," International Tax and Public Finance, Springer, vol. 13(2), pages 269-294, May. [Downloadable!] (restricted)
  8. Gnanaraj Chellaraj & Aaditya Mattoo, 2009. "Can the Knowledge-Capital Model Explain Sectoral Foreign Invesment? Evidence From Singapore," Economics Study Area Working Papers 101, East-West Center, Economics Study Area. [Downloadable!]
  9. Paolo Figini & Holger Görg, 2006. "Does Foreign Direct Investment Affect Wage Inequality? An Empirical Investigation," IZA Discussion Papers 2336, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  10. Faini, Riccardo, 2004. "Trade Liberalization in a Globalizing World," IZA Discussion Papers 1406, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  11. Johnson, Andreas, 2006. "The Effects of FDI Inflows on Host Country Economic Growth," Working Paper Series in Economics and Institutions of Innovation 58, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies. [Downloadable!]
  12. Marcus Noland, 2004. "Popular Attitudes, Globalization, and Risk," Peterson Institute Working Paper Series WP04-2, Peterson Institute for International Economics. [Downloadable!]
    Other versions:
  13. Ilan Noy & Tam B. Vu, 2007. "Capital Account Liberalization and Foreign Direct Investment," Working Papers 200708, University of Hawaii at Manoa, Department of Economics. [Downloadable!]
    Other versions:
  14. Alaya MAROUANE (Université de Tunis) & Dalila NICET-CHENAF (GREThA-GRES) & Eric ROUGIER (GREThA-GRES), 2008. "The law of growth and attraction: an endogenous model of absorptive capacities, FDI and income for MENA countries," Cahiers du GRES 2008-21, Groupement de Recherches Economiques et Sociales. [Downloadable!]
    Other versions:
  15. David Mayer-Foulkes & Peter Nunnenkamp, 2005. "Do Multinational Enterprises Contribute to Convergence or Divergence? A Disaggregated Analysis of US FDI," DEGIT Conference Papers c010_045, DEGIT, Dynamics, Economic Growth, and International Trade. [Downloadable!]
  16. Tam Bang Vu & Ilan Noy, 2007. "Sectoral Analysis of Foreign Investment and Growth In the Developed Countries," Working Papers 200725, University of Hawaii at Manoa, Department of Economics. [Downloadable!]
  17. Alejandro Ciruelos & Miao Wang, 2005. "International Technology Diffusion: Effects of Trade and FDI," Atlantic Economic Journal, International Atlantic Economic Society, vol. 33(4), pages 437-449, December. [Downloadable!] (restricted)
  18. Marcella Alsan & David E. Bloom & David Canning, 2004. "The Effect of Population Health on Foreign Direct Investment," NBER Working Papers 10596, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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