Do All Foreign Direct Investment Inflows Benefit the Local Economy?

22 Pages Posted: 1 Mar 2007

See all articles by Kostas Axarloglou

Kostas Axarloglou

ALBA Graduate Business School

Mike Pournarakis

Athens University of Economics and Business - Department of Economics

Abstract

The present study measures the impact of FDI inflows on the local economies of the US states that receive most of the FDI inflows in the country. It appears that FDI inflows in manufacturing have rather weak effects on local employment and wages in most of the states in the sample. However, these results are primarily due to the industry composition of the FDI. FDI inflows in Printing and Publishing, Transportation Equipment and Instruments have positive effects on local employment and wages, while FDI inflows in Leather and Stone/Clay/Glass have detrimental effects on local labour markets in most of the states in the sample. These findings indicate the importance of industry characteristics in evaluating the effects of FDI inflows on local communities. Also, they emphasise the need for US states to selectively target and attract FDI inflows in specific industries.

Suggested Citation

Axarloglou, Kostas and Pournarakis, Mike, Do All Foreign Direct Investment Inflows Benefit the Local Economy?. World Economy, Vol. 30, Issue 3, pp. 424-445, March 2007. Available at SSRN: https://ssrn.com/abstract=966550 or http://dx.doi.org/10.1111/j.1467-9701.2006.00824.x

Kostas Axarloglou (Contact Author)

ALBA Graduate Business School ( email )

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Mike Pournarakis

Athens University of Economics and Business - Department of Economics

76 Patission Street
GR-10434 Athens
Greece

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