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Inappropriate Pooling of Wealthy and Poor Countries in Empirical FDI Studies

  • Bruce A. Blonigen

    ()

    (Department of Economics, University of Oregon)

  • Miao Wang

    ()

    (Department of Economics, Marquette University)

This paper examines the question of whether less-developed countries' (LDCs') experiences with foreign direct investment (FDI) systematically different from those of developed countries (DCs). We do this by examining three types of empirical FDI studies that typically do not distinguish between LDCs and DCs in their analysis. First, we find that the underlying factors that determine the location of FDI activity across countries vary systematically across LDCs and DCs in a way that is not captured by current empirical models of FDI. Second, the effect of FDI on economic growth is one that is only supported for LDCs in the aggregate data, not DCs. Third, the evidence suggests that FDI is much less likely to crowd out (more likely to crowd in) domestic investment for LDCs than DCs.

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File URL: http://www.nber.org/papers/w10378.pdf
File Function: First version, 2004
Download Restriction: no

Paper provided by Marquette University, Center for Global and Economic Studies and Department of Economics in its series Working Papers and Research with number 0903.

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Length: 31 pages
Date of creation: Mar 2004
Date of revision:
Publication status: Published in T. Moran, E. Graham and M. Blomstrom (eds.), Does Foreign Direct Investment Promote Development? Washington, DC: Institute for International Economics, 2005, pages 221-224
Handle: RePEc:mrq:wpaper:0903
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Web page: http://www.busamd.mu.edu/Economics/
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  1. James R. Markusen, 1997. "Trade versus Investment Liberalization," NBER Working Papers 6231, National Bureau of Economic Research, Inc.
  2. Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Scholarly Articles 3445092, Harvard University Department of Economics.
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  8. Markusen, James R. & Venables, Anthony J. & Eby Konan, Denise & Zhang, Kevin H., 1996. "A Unified Treatment of Horizontal Direct Investment, Vertical Direct Investment, and the Pattern of Trade in Goods and Services," Working Paper Series 465, Research Institute of Industrial Economics.
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  13. repec:rus:hseeco:121605 is not listed on IDEAS
  14. Markusen, James R., 1984. "Multinationals, multi-plant economies, and the gains from trade," Journal of International Economics, Elsevier, vol. 16(3-4), pages 205-226, May.
  15. Islam, Nazrul, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 1127-70, November.
  16. Nazrul Islam, 1998. "Growth Empirics: A Panel Data Approach- A Reply," The Quarterly Journal of Economics, MIT Press, vol. 113(1), pages 325-329, February.
  17. Sala-i-Martin, Xavier, 1997. "I Just Ran Two Million Regressions," American Economic Review, American Economic Association, vol. 87(2), pages 178-83, May.
  18. Balasubramanyam, V N & Salisu, M & Sapsford, David, 1996. "Foreign Direct Investment and Growth in EP and IS Countries," Economic Journal, Royal Economic Society, vol. 106(434), pages 92-105, January.
  19. Barro, Robert J & Lee, Jong Wha, 1996. "International Measures of Schooling Years and Schooling Quality," American Economic Review, American Economic Association, vol. 86(2), pages 218-23, May.
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