Effects of Foreign Direct Investment on the Irish Economy. An Econometric Analysis of the GDP and of the Determining Factors of the Inflow of Foreign Direct Investment into Ireland

Abstract

The main goal of our analysis in this article is the examination how the foreign direct investment influences less developed regions ofthe EU, especially the economy ofthe Member States where there are based. We try to verify the thesis that the economic growth of Ireland depends in a high degree on the capital inflows in form of FDI. Moreover, we examine which factors attract the foreign investors to locate their business in Ireland. To proof the relation between inflows of FDI and possible factors determining these inflows, an appropriate econometric model has been chosen. There are two important indicators, which strongly confirm that the foreign capital plays a huge role in the economic growth of Ireland. The first one is the enormous part of foreign capital in creation of GDP, in comparison with other Member States, and its high relation to total investments. The detailed analysis of the invested capital in Ireland shows that the high technology industry employees well qualified labour force which means that such industries like software production, pharmacy and biotechnology are interesting for foreign investors. In these industrial branches Ireland is an important world exporter. Moreover, the use of the new imported technologies and the local resources creates new jobs. The stable political and social situation, economic and technical infrastructure, qualified labour force and tax preferences for foreign investors are the most significant factors determining the inflow of FDI to Ireland