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FDI and Domestic Investment: An Industry-Level View

  • Arndt Christian

    ()

    (University of Nürtingen)

  • Buch Claudia M

    ()

    (Universität Tübingen)

  • Schnitzer Monika E

    ()

    (University of Munich)

Previous empirical work on the link between domestic and foreign investment has provided mixed results. This may partly be due to the level of aggregation of the data. In this paper, we argue that the impact of FDI on the domestic capital stock depends on the structure of industries. Using industry-level data on the stock of German FDI, we test our predictions. We use panel cointegration methods which address the potential endogeneity of FDI. We find evidence for a positive long-run impact of FDI on the domestic capital stock.

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Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 10 (2010)
Issue (Month): 1 (July)
Pages: 1-22

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Handle: RePEc:bpj:bejeap:v:10:y:2010:i:1:n:69
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  1. Martin S. Feldstein, 1995. "The Effects of Outbound Foreign Direct Investment on the Domestic Capital Stock," NBER Chapters, in: The Effects of Taxation on Multinational Corporations, pages 43-66 National Bureau of Economic Research, Inc.
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