The Impact of Foreign Direct Investment on Agriculture in the United States

Project Summary

This project aims at measuring the impact of foreign direct investment on agriculture in the United States. These investment activities are vital for the agricultural and food industry as they ensure economic growth and prosperity, create highly-compensated jobs, spur innovation, and drive international trade. However, so far, we know little about the impact of these investment activities on firm performance and spillover effects on domestic firms. Therefore, this project will develop a framework to precisely measure the impact of foreign direct investment on firms operating in the agricultural and food industry. We will accomplish this task by compiling a novel dataset on investment activities and linking this data to detailed productivity and efficiency measures collected at the firm level. By exploiting changes in investment activities over time and across industries, we disentangle the effect of foreign ownership on firm performance. The analysis will enable us to not only measure the impact on foreign subsidiaries but also to investigate spillover effects on domestic firms. Therefore, our project will enhance the understanding of a highly relevant policy issue largely neglected in the empirical literature on foreign trade and investment while being vital for the future of agriculture in the United States. Such understanding provides the foundation for fact-based public discussions and allows for informed decisions. Consequently, this project enhances market efficiency and performance by providing essential knowledge on the functioning of markets in light of changing trade and investment environments.

Project Objectives

The research will accomplish the following objectives:

Objective 1: Assemble a complete and retrospective dataset of foreign direct investment in the United States at the firm level.

Objective 2: Compile a time-consistent and comprehensive dataset on input and output measures at the firm level.

Objective 3: Use input and output data for the agricultural and food industry to measure productivity and efficiency at the firm level.

Objective 4: Analyze the impact of foreign ownership on firm performance and investigate differences in the ownership effect according to parent characteristics and voting shares.

Objective 5: Develop and apply novel statistical methods to investigate (spatial and product space) spillover effects of foreign ownership on domestic firms.

Objective 6: Measure the impact of foreign direct investment on job growth, innovation, and foreign trade.

Funding Agency

National Institute of Food and Agriculture, Grant No. 2020-67024-30964 [Link]

Work in Progress

• Rising Protectionism and Foreign Direct Investment, with Dongin Kim, under review. [Paper]

• The Linder Hypothesis for Foreign Direct Investment Revisited, with Dongin Kim, Review of International Economics, revise & resubmit. [Paper]

• Similarity in Demand Structures and Foreign Direct Investment in the Food and Beverage Industry, with Dongin Kim.  [Paper]

Research Team