Journal
WORLD DEVELOPMENT
Volume 88, Issue -, Pages 1-9Publisher
PERGAMON-ELSEVIER SCIENCE LTD
DOI: 10.1016/j.worlddev.2014.04.008
Keywords
investment; FDI; governance; technology spillovers; rent seeking; developing countries
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Studies of the relationship between FDI and domestic investment reach contradictory findings. We argue that some of the conflicting evidence may be explained by the use of poor proxies for the theoretical concepts and questionable methodological choices. We review the paper of Morrissey and Udomkerdmonkol published in this journal in 2012. Improvements in the construction of the proxies and. refinements in the estimation methodology reverse the finding of Morrissey and Udomkerdmonkol that FDI inflows crowd out domestic investment. Furthermore, there is no strong evidence that good governance actually encourages domestic investment. (C) 2014 Elsevier Ltd. All rights reserved.
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