What do we know about FDI?
By Lisa J Walters, on 24 October 2017
By Randolph Bruno (UCL), Nauro Campos (Brunel) and Saul Estrin (LSE).
The conventional wisdom is that although economic effects of FDI on the host economy are mostly positive, they are conditional. For example, they depend on host countries having reached critical levels of human capital or institutional quality. This column provides a systematic assessment of the contemporary evidence. It reports a meta-analysis of about 1100 estimates focusing on countries under those thresholds (i.e., those for which previous studies tend to find no robust effects). It concludes that the economic impact of FDI is less “conditional” than commonly thought. One potential explanation is that, below the thresholds, the difference between “macro” and “micro” effects is substantial while, above them, the difference between private and social returns is smaller.