Foreign Direct Investment and Economic Growth: New Evidence from Post-Socialist Transition Countries

In this article, we revisit classic sociological debates regarding the growth effects of Foreign Direct Investment (FDI). First, we identify a series of theoretical and empirical issues that halted sociological research on the developmental consequences of FDI. Second, we illustrate that post-socialist transition (PST) provides a historically novel opportunity to reinvigorate the debate. These countries experienced rapid industrialization but nearly zero FDI under socialism, and we can therefore observe changes in output as FDI accumulates in real time and effectively control for alternative sources of underdevelopment that might otherwise become conflated with FDI. We then estimate growth models that correct for biases owing to country- and period-specific heterogeneity and endogeneity in the FDI→ growth link. Our results suggest that FDI penetration reduces economic growth in the short and long term, and are robust to alternative choices of measurement and econometric specification. We conclude by implicating these findings in debates about post-socialist transition and economic growth, and by posing questions for future research. © The Author 2014. Published by Oxford University Press on behalf of the University of North Carolina at Chapel Hill. All rights reserved

Signalling Demand for Foreign Investment: Postsocialist Countries in the Global Bilateral Investment Treaties Network

A unique dataset on bilateral investment treaties provides a novel source of evidence on the link between neoliberal globalisation and market transition. We argue that postsocialist countries of Europe and Eurasia, more than other developing regions in the world, signed such treaties to signal demand for foreign investment in the spirit of neoliberalism. We calculated the density of the whole BIT network since its inception in 1959 to 2009, and density and centrality of different regional blocks within it, and found strong support for our argument. Yet, even if bilateral investment treaties are designed to promote foreign direct investment, dynamic panel regression models show that signing them does not automatically translate into foreign direct investment inflows for postsocialist European and Eurasian countries in the 1990–2010 period