Revisiting the Impact of Foreign Direct Investment on Crime: A Global Analysis

Drawing upon extensive literature on Foreign Direct Investment (FDI) spillovers, we hypothesize that FDI inflow represents a double‐edged sword with respect to crime in host countries. On one hand, FDI can contribute to economic growth and social well‐being by infusing capital and knowledge into the host countries, thereby potentially inhibiting criminal activities, as economic theories of crime suggest. On the other hand, the inflow of FDI can also trigger a process of crowding out, leading to the displacement of local firms, job losses, and subsequently fueling crime. By constructing a global data set of property crime and violent crime, this study demonstrates that FDI inflow inhibits crime in lower‐ and higher‐income countries, whereas it tends to promote crime in middle‐income countries. These effects are more significant for violent crime than for property crime. Notably, despite income levels, inequality in host countries amplifies the inhibiting influence of FDI inflow on property crime. These findings present a novel perspective on the social spillover effects of FDI and provide valuable insights for policymakers seeking to mitigate crime. Additionally, this study underscores the importance for middle‐income countries to establish efficient social welfare systems to counterbalance the potential crime‐promoting effect of FDI.