Does Foreign Direct Investment Have Crowding in Or Crowding out Effect on Domestic Investment? An Analysis on the Mining Sector

OpenAlex Türkçe

The study examines whether foreign direct investment (FDI) crowds in or crowds out domestic investment in the mining sector, using a cross-section dataset of 25 developed countries over the period 2009-2019. The extensive literature review reveals no consensus on the influence of FDI on domestic investment. Notably, findings differentiate significantly across sectors, highlighting the importance of a sector-specific approach. The empirical analysis, based on the System Generalized Methods of Moments (GMM) estimation technique, confirms that FDI crowds out domestic investment in the mining sector in the short run. Although the crowding out effect persists in the long run, its magnitude diminishes slightly over time. The results demonstrate that FDI and domestic investment are substitutes in the mining sector. The findings can be attributed to both sector-specific characteristics and the structural features of developed economies.