Food manufacturing foreign divestment and domestic investment in developed countries

Abstract

Whilst there is some literature on the effect of inward foreign direct investment on domestic investment for the whole economy and the agricultural sector, that of foreign divestment on domestic investment for food manufacturing is rare. This paper contributes to the literature by estimating the crowding effect of foreign divestment on domestic investment in the food manufacturing sector using an unbalanced panel of 29 countries from 1991 to 2019. Foreign divestment crowded out domestic investment for developed countries in the short and long runs. In terms of the absolute reduction in domestic investment, the short-run effect is higher than the long-run effect. Policies to attract inward foreign direct investment and retain it should be pursued.