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The effects of restrictive measures on cross‐border investment: Evidence from OECD and emerging countries

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  • Amara Zongo

Abstract

This paper investigates the effects of global and sectoral restrictive measures on cross‐border FDI among 49 advanced and emerging countries. We use a gravity model with panel data from 2010 to 2019 and the FDI Restrictiveness Index of the OECD that quantifies the level of restriction in FDI. Our results suggest that global restrictive measures do not significantly affect cross‐border FDI in OECD countries, while restrictions in the service sector have negative and significant effects on FDI. Moreover, the overall restrictive measures and those in the primary, secondary and service sectors negatively impact inward FDI among OECD and big emerging countries. The restrictions in the primary sector are a main obstacle to inward FDI in the big emerging countries. In addition, global and sectoral restrictions do not have a significant effect on FDI between advanced and African countries. The analysis of disaggregated sectoral restrictive measures shows that restrictions in business and other financial services are negatively associated with intra‐OECD FDI. We also find that restrictions in the manufacturing sector have restrictive impacts on inward FDI in the large emerging countries, and those in the mining, quarrying and oil extraction sector hinder inward FDI in African countries. Reforms to liberalise sectoral restrictions by country have positive effects on FDI, but deregulation of the services sector has beneficial effects on inward FDI from advanced and emerging countries.

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  • Amara Zongo, 2022. "The effects of restrictive measures on cross‐border investment: Evidence from OECD and emerging countries," The World Economy, Wiley Blackwell, vol. 45(8), pages 2428-2477, August.
    • Handle: RePEc:bla:worlde:v:45:y:2022:i:8:p:2428-2477
    DOI: 10.1111/twec.13250
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    JEL classification:

    • D25 - Microeconomics - - Production and Organizations - - - Intertemporal Firm Choice: Investment, Capacity, and Financing
    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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