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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

    (GREThA - Groupe de Recherche en Economie Théorique et Appliquée - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique, Larefi - Laboratoire d'analyse et de recherche en économie et finance internationales - UB - Université de Bordeaux)

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 service sector negatively impact inward FDI among OECD and big emerging countries. In addition, restrictions in the services sector impede inward FDI in African countries. Interestingly, restrictions in the secondary sector boost FDI between advanced and African countries, with larger effects for inward investments in 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, while restrictions in the banking sector have a significant positive impact on FDI. We also find that restrictions in the manufacturing sector have restrictive impacts on inwrad FDI in big emerging countries, and those in the mining, quarrying, and oil extraction sector hinder inward FDI in African countries. Reforms to liberalize sectoral restrictions by country have positive effects on FDI, but deregulation of the services sector has beneficial effects on inward FDI in all countries.
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  • Amara Zongo, 2021. "The Effects of Restrictive Measures on Cross-Border Investment: Evidence from OECD and Emerging Countries," Working Papers hal-03432663, HAL.
    • Handle: RePEc:hal:wpaper:hal-03432663
    Note: View the original document on HAL open archive server: https://hal.science/hal-03432663
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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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