This paper investigates whether and to what extent foreign direct investment inflows into the United Kingdom are caused by its membership in the European Union (EU). It reports two main sets of econometric estimates: (a) synthetic counterfactual method with annual data for large sample of developing and developed countries over 1970-2014 and (b) gravity estimates using 34 OECD countries bilateral data for 1985-2013. The two sets of estimates strongly concur: EU membership increases FDI inflows by about 30%. This result is robust to changes in specification, country samples, time windows, and the use of different estimators (panel, PPML and Heckman).

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Randolph Bruno, Nauro Campos, Saul Estrin and Meng Tian

24 October 2016     Paper Number CEPDP1453

Download PDF - Foreign direct investment and the relationship between the United Kingdom and the European Union

This CEP discussion paper is published under the centre's Trade programme.