The effect on foreign direct investment of membership in the European Union

Randolph Bruno (), Nauro Campos and Saul Estrin

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This article 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 from 1985 to 2018, we find EU membership leads to about 60 per cent higher FDI investment into the host economy from outside the EU, and around 50 per cent higher intra-EU FDI. Moreover, we find that the effect of EU membership on FDI is larger than from membership of the North American Free Trade Agreement, the European Free Trade Association and the Southern Common Market, and that the single market is the cornerstone of this differential impact.

Keywords: deep economic integration; Foreign direct investment; European Union; structural gravity model; single market (search for similar items in EconPapers)
JEL-codes: F3 G3 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2021-07
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 (11)

Published in Journal of Common Market Studies, July, 2021, 59(4), pp. 802-821. ISSN: 0021-9886

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http://eprints.lse.ac.uk/107939/ Open access version. (application/pdf)

Related works:
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 (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:107939

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