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Do Natural Resources Attract Non-Resource FDI?

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  • Rick Van der Ploeg
  • Steven Poelhekke

Abstract

A new and extensive panel of outward non-resource and resource FDI is used to investigate the effect of natural resources on the different components of FDI. Our main findings are as follows. First, for those countries which were not a resource producer before, a resource discovery causes non-resource FDI to fall by 16% in the short run and by 68% in the long run. Second, for those countries which were already a resource producer, a doubling of resource rents induces a 12.4% fall in non-resource FDI. Third, on average, the contraction in non-resource FDI outweighs the boom in resource FDI. Aggregate FDI falls by 4% if the resource bonanza is doubled. Finally, these negative effects on non-resource FDI are amplified through the positive spatial lags in non-resource FDI. We also find that resource FDI is vertical whereas non-resource FDI is of the export-fragmentation variety. Our main findings are robust to different measures of resource reserves and the oil price and to allowing for sample selection bias.

Suggested Citation

  • Rick Van der Ploeg & Steven Poelhekke, 2010. "Do Natural Resources Attract Non-Resource FDI?," OxCarre Working Papers 051, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    • Handle: RePEc:oxf:oxcrwp:051
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    File URL: https://ora.ox.ac.uk/objects/uuid:143e95c8-e2b6-4cdb-8a64-65d947fe0e48
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    References listed on IDEAS

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    2. J. M. C. Santos Silva & Silvana Tenreyro, 2006. "The Log of Gravity," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 641-658, November.
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    More about this item

    Keywords

    outward non-resource and resource FDI; subsoil assets; co-integration tests; spatial econometrics; hydrocarbon reserves; external margin; sample selection bias;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)

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