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Inappropriate Pooling of Wealthy and Poor Countries in Empirical FDI Studies

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  • Bruce A. Blonigen

    ()
    (Department of Economics, University of Oregon)

  • Miao Wang

    ()
    (Department of Economics, Marquette University)

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
File Function: First version, 2004
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Bibliographic Info

Paper provided by Marquette University, Center for Global and Economic Studies and Department of Economics in its series Working Papers and Research with number 0903.

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Length: 31 pages
Date of creation: Mar 2004
Date of revision:
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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