Chapter

Home-Country Effects of FDI

Gunnar Fors and Ari Kokko

in Topics in Empirical International Economics

Published by University of Chicago Press

Published in print April 2001 | ISBN: 9780226060835
Published online February 2013 | e-ISBN: 9780226060859 | DOI: http://dx.doi.org/10.7208/chicago/9780226060859.003.0006
Home-Country Effects of FDI

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The home-country effects of foreign direct investment (FDI) have received renewed attention over the past decade. One important reason is the development of the regional integration processes in Europe and the Americas. The reduction of regional trade and investment barriers has created new, large markets and removed restrictions on where plants can be located. However, it is not obvious that the benefits will be distributed equally among the participating countries, or between members of the integration agreement and outsiders. The worry in the home countries of multinational corporations (MNCs) — in particular, those home countries that are large net outward investors — is that foreign production and investment may replace home-country exports, employment, or investment. This chapter examines the home-country effects of FDI using detailed firm- and plant-level data from a sample of MNCs from Sweden for the period 1986–1994. It also considers the direction of some of the structural changes that are in progress and show that the effects of FDI at the plant level are significantly different from those at more aggregate levels.

Keywords: home country; foreign direct investment; plants; multinational corporations; exports; employment; Sweden; structural changes; foreign production

Chapter.  9432 words.  Illustrated.

Subjects: International Economics

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