EU Enlargement and Inward FDI

The authors attempt to highlight the effects of the recent surge of FDI in the enlargement states on domestic investment and growth. A similar analysis is carried out for the EU‐15 in order to ascertain whether this type of capital inflow has a differential impact in these two regions of the European Union. Empirical analysis, based on dynamic panel data models, suggests the existence of a positive contribution of FDI to greater domestic investment and economic growth in the new member states. The evidence obtained for the EU‐15 old member countries confirms the FDI‐growth nexus but does not suggest a positive impact of FDI on domestic investment, which would be consistent with these capital inflows being of a different nature for these more advanced economies.