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Do Natural Resources Attract Non-Resource FDI?

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  • Steven Poelhekke
  • Rick van der Ploeg

Abstract

A new and extensive panel of outward non-resource and resource FDI is used to obtain panel error-correction and estimates with spatial lags of the determinants of non-resource and resource FDI. Our main findings are as follows. First, for those countries which were not a resource producer before, a resource discovery causes non-resource FDI to fall by 16% in the short run and by 68% in the long run. Second, for those countries which wre already a resource producer, a doubling of resource rents induces a 12.4% fall in non-resource FDI. Third, on average, teh contractin in non-reosurce FDI outweighs the boom in resource FDI. Aggregate FDI falls by 4% if the resource bonanza is doubled. Finally, these negative effects on non-resource FDI are amplified through the positive spatial lags in non-resource FDI. We also find that resource FDI is vertical wheras non-resource FDI is of the export-fragmentation variety. Our main findings are robust to different measures of resource reserves and the oil price and to allowing for sample selection bias..

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File URL: http://www.oxcarre.ox.ac.uk/images/stories/papers/ResearchPapers/oxcarrerp201051.pdf
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Bibliographic Info

Paper provided by Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford in its series OxCarre Working Papers with number 051.

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Date of creation: 2010
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Handle: RePEc:oxf:oxcrwp:051

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Related research

Keywords: outward non-resource and resource FDI; subsoil assets; co-integration tests; spatial econmetrics; hydrocarbon reserves; external margin; sample selection bias;

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  1. J. M. C. Santos Silva & Silvana Tenreyro, 2006. "The Log of Gravity," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 641-658, November.
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Cited by:
  1. Harding, Torfinn & Venables, Anthony J, 2013. "The implications of natural resource exports for non-resource trade," CEPR Discussion Papers 9318, C.E.P.R. Discussion Papers.
  2. Hayat, Arshad, 2014. "FDI and Economic Growth: The Role of Natural Resources," MPRA Paper 57021, University Library of Munich, Germany.

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