The Effect on Foreign Direct Investment of Membership in the European Union

Randolph Bruno (), Nauro Campos and Saul Estrin ()
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Saul Estrin: London School of Economics

No 13668, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper explores the impact of EU membership on foreign direct investment (FDI). It analyses empirically how the effects of such deep integration differ from other forms and investigates what drives these effects. Using a structural gravity framework on annual bilateral FDI data for almost every country in the world, over 1985-2018, we find EU membership leads FDI into the host economy to be about 60% higher for investment from outside the EU, and around 50% higher for intra-EU FDI. Moreover, we find that the effect of EU membership on FDI is larger than from membership of NAFTA, EFTA, or MERCOSUR, and that the Single Market is the cornerstone of this differential impact.

Keywords: single market; Structural Gravity Model; economic integration; foreign direct investment; European Union (search for similar items in EconPapers)
JEL-codes: F21 F36 O52 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2020-09
New Economics Papers: this item is included in nep-eec and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published - published in: Journal of Common Market Studies, 2021, 59 (4), 802-821

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Journal Article: The Effect on Foreign Direct Investment of Membership in the European Union (2021)
Working Paper: The effect on foreign direct investment of membership in the European Union (2021)
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