Accessible Unlicensed Requires Authentication Published by De Gruyter July 30, 2010

FDI and Domestic Investment: An Industry-Level View

Christian Arndt, Claudia M Buch and Monika E Schnitzer

Abstract

Previous empirical work on the link between domestic and foreign investment has provided mixed results. This may partly be due to the level of aggregation of the data. In this paper, we argue that the impact of FDI on the domestic capital stock depends on the structure of industries. Using industry-level data on the stock of German FDI, we test our predictions. We use panel cointegration methods which address the potential endogeneity of FDI. We find evidence for a positive long-run impact of FDI on the domestic capital stock.

Published Online: 2010-7-30

©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston