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Inappropriate Pooling of Wealthy and Poor Countries in Empirical FDI Studies

Author

Listed:
  • Bruce A. Blonigen

    (Department of Economics, University of Oregon)

  • Miao Wang

    (Department of Economics, Marquette University)

Abstract

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.

Suggested Citation

  • Bruce A. Blonigen & Miao Wang, 2004. "Inappropriate Pooling of Wealthy and Poor Countries in Empirical FDI Studies," Working Papers and Research 0903, Marquette University, Center for Global and Economic Studies and Department of Economics.
    • Handle: RePEc:mrq:wpaper:0903
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    File URL: http://www.nber.org/papers/w10378.pdf
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    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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