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Economic integration, foreign investment and international trade: the effects of membership of the European Union

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  • Bruno, Randolph Luca
  • Campos, Nauro
  • Estrin, Saul
  • Tian, Meng

Abstract

This paper investigates the importance of economic integration in simultaneously fostering foreign direct investment (FDI) and international trade. These have rarely been analyzed jointly using contemporary econometric methods. We estimate the effect of European Union (EU) membership on FDI inflows and trade using annual bilateral data from 34 OECD countries over 1985–2013. We find that EU membership increases FDI inflows by on average 28%. We jointly estimate the impact of EU membership on trade and FDI and find that they are substantial, with the one on trade larger than the one on FDI, in the order of double

Suggested Citation

  • Bruno, Randolph Luca & Campos, Nauro & Estrin, Saul & Tian, Meng, 2017. "Economic integration, foreign investment and international trade: the effects of membership of the European Union," LSE Research Online Documents on Economics 86615, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:86615
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    Cited by:

    1. Camarero, Mariam & Moliner, Sergi & Tamarit, Cecilio, 2024. "A Fresh Assessment of the Depth of the “Euro Effect" on US FDI," Single Market Economics Papers WP2024/18, Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs (European Commission), Chief Economist Team.
    2. Campos, Nauro F., 2019. "B for Brexit: A Survey of the Economics Academic Literature," IZA Discussion Papers 12134, Institute of Labor Economics (IZA).
    3. Mariam Camarero & Sergi Moliner & Cecilio Tamarit, 2022. "Which are the long-run determinants of US outward FDI? Evidence using large long-memory panels," Working Papers 2022.08, International Network for Economic Research - INFER.
    4. Hengfei Huan & Yingming Zhu & Jishuang Liu, 2022. "A quasi‐natural experiment research regarding the impact of regional integration expansion in the Yangtze River Delta on foreign direct investment," Growth and Change, Wiley Blackwell, vol. 53(4), pages 1854-1876, December.
    5. Magdana Kondaridze & Jeff Luckstead, 2023. "Determinants of dairy‐product trade: Do subsidies matter?," Journal of Agricultural Economics, Wiley Blackwell, vol. 74(3), pages 857-873, September.

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    More about this item

    Keywords

    special economic integration effects; foreign direct investment; international trade; European Union; gravity model;
    All these keywords.

    JEL classification:

    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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