The effect of sanctions on U.S. foreign direct investment

Glen Biglaiser, David Lektzian

Research output: Contribution to journalArticle

29 Scopus citations

Abstract

For years, the United States has imposed economic sanctions to compel countries to alter their behavior. An important concern is whether government sanctions influence private foreign direct investment (FDI) decisions, the largest source of foreign capital. In the first study to assess empirically the relationship between economic sanctions and FDI, we consider whether U.S. sanctions influence U.S. FDI inflows into targeted countries. Using panel data for 171 countries from 1965 to 2000, we find strong evidence that U.S investors pull out of countries targeted for U.S sanctions prior to their imposition. This disinvestment is not permanent and investment tends to return after the sanctions are imposed. The results provide support for FDI studies that show the effect of risk on investor decision making.

Original languageEnglish
Pages (from-to)531-551
Number of pages21
JournalInternational Organization
Volume65
Issue number3
DOIs
StatePublished - Jun 2011

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