Abstract
This paper estimates the effects of outward FDI on domestic business investment in Germany at the industry level for a panel of 19 industry and 10 services sectors. We pay particular attention to the different motivations behind FDI, and distinguish between FDI to high-versus low-wage countries, to Europe versus the rest of the world, and FDI in services and industry sectors.We find that, in industry, FDI to low-wage countries crowds out domestic investment, whereas FDI to high-wage countries outside Europe crowds in domestic investment. In services, FDI to Western Europe crowds in domestic investment.
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