Foreign direct investment and the domestic capital stock
By: Mihir A. Desai, C. Fritz Foley, James R. Hines Jr.
Contributors: Foley, C. Fritz.; Hines, James R.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 11075; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 11075.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Investments, Foreign -- OECD countries -- Econometric models.; Capital investments -- OECD countries -- Econometric models.; Investments, American -- Econometric models.; Capital investments -- United States -- Econometric models.
Description: "This paper evaluates evidence of the impact of outbound foreign direct investment (FDI) on domestic investment rates.  OECD countries with high rates of outbound FDI in the 1980s and 1990s exhibited lower domestic investment than other countries, which suggests that FDI and domestic investment are substitutes.  U.S. time series data tell a very different story, however: years in which American multinational firms have greater foreign capital expenditures coincide with greater domestic capital spending by the same firms.  One dollar of additional foreign capital spending is associated with 3.5 dollars of additional domestic capital spending in the time series, implying that foreign and domestic capital are complements in production by multinational firms.  This effect is consistent with cross sectional evidence that firms whose foreign operations expand simultaneously expand their domestic operations, and suggests that interpretation of the OECD cross sectional evidence may be confounded by omitted variables"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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