How Global is FDI? Evidence from the Analysis of Theil Indices

Authors: Frank Bickenbach, Wan-Hsin Liu and Peter Nunnenkamp (Empirical Economics, 2018, Vol. 55(4), 1603-1635).

It is open to question whether the intensified worldwide competition for FDI has reduced its traditionally strong concentration in a few large and relatively advanced host countries. We calculate and decompose Theil indices to track changes in absolute and relative concentration of FDI during the period 1970-2013. We find that both absolute and relative concentration decreased when excluding offshore financial centres from the overall sample. In addition to the narrowing gap between OECD and non-OECD countries, the concentration across non-OECD countries declined for both the absolute and relative measures. This is also true for major subgroups of non-OECD countries. Finally, recent developments indicate that low-income countries are no longer at the losing end of the competition for FDI.

Keywords: Foreign direct investment, concentration, Theil decomposition

JEL Classification: F21

DOI: https://doi.org/10.1007/s00181-017-1346-y