"This paper evaluates evidence of the impact of outbound foreign direct investment (FDI) on domestic investment rates. OECD countries with high rates of outbound FDI in the 1980s and 1990s exhibited lower domestic investment than other countries, which suggests that FDI and domestic investment are substitutes. U.S. time series data tell a very different story, however: years in which American multinational firms have greater foreign capital expenditures coincide with greater domestic capital spending by the same firms. One dollar of additional foreign capital spending is associated with 3.5 dollars of additional domestic capital spending in the time series, implying that foreign and domestic capital are complements in production by multinational firms. This effect is consistent with cross sectional evidence that firms whose foreign operations expand simultaneously expand their domestic operations, and suggests that interpretation of the OECD cross sectional evidence may be confounded by omitted variables"--National Bureau of Economic Research web site.

Foreign Direct Investment and the Chinese Economy provides a comprehensive overview of the impact of foreign direct investment, with extensive empirical evidence, on the Chinese economy over the last three and a half decades.

The role of foreign direct investment (FDI) in international capital flows is examined. Theories of the determinants of FDI are surveyed, and the economic consequences of FDI for both host (recipient) and home (investor) nations are examined in light of empirical studies. Policy issues surrounding possible negotiation of a “multilateral agreement on investment” are discussed.

Inward and outward direct investment (FDI) stocks and flows tend to go together, across countries and over time. The countries that invest extensively abroad are usually also large recipients of FDI. There is little evidence that flows of FDI are a major influence on capital formation. That lack of effects suggests that financing capital formation is not a primary role of FDI. FDI transfers the ownership of existing productive assets from one set of owners to others willing to pay more for them, possibly from less efficient to more efficient owners. One fact that suggests this function is that outward U.S. FDI production and outward minus inward production tends to be concentrated in industries of U. S. comparative advantage. It is not in industries of U.S. comparative disadvantage, as might be expected if FDI were primarily a method of relocating production to more suitable locations. Within individual broad industry groups, U.S. FDI tends to move to countries with comparative disadvantages in trade relative to the United States in machinery industries. In resource-intensive industries, however, it moves to countries with comparative advantages in trade relative to the United States. The difference suggests that company comparative advantages dominate investment in machinery, but country comparative advantages dominate in resource-intensive industries. If FDI is transferring assets and production from less efficient to more efficient owners and managers, inward FDI can be viewed in the recipient countries as freeing capital that had been frozen in industries that the owners would prefer to leave. It permits the former owners to allocate their capital in more desirable and profitable ways. Outward FDI permits a home country's firms to optimally exploit their skills and comparative advantages, perhaps lost to the home countries, but retained by the country's firms

The tax rules of the United States and other countries have intended and unintended effects on the operations of multinational corporations, influencing everything from the formation and allocation of capital to competitive strategies. The growing importance of international business has led economists to reconsider whether current systems of taxing international income are viable in a world of significant capital market integration and global commercial competition. In an attempt to quantify the effect of tax policy on international investment choices, this volume presents in-depth analyses of the interaction of international tax rules and the investment decisions of multinational enterprises. Ten papers assess the role played by multinational firms and their investment in the U.S. economy and the design of international tax rules for multinational investment; analyze channels through which international tax rules affect the costs of international business activities; and examine ways in which international tax rules affect financing decisions of multinational firms. As a group, the papers demonstrate that international tax rules have significant effects on firms' investment and other financing decisions.