Celtic phoenix or leprechaun economics? The politics of an FDI led growth model in Europe

Abstract

In this paper we argue that Ireland’s post-crisis economic recovery in Europe was driven by foreign direct investment (FDI) from Silicon Valley, and whilst this growth model was made possible by Ireland’s low corporate tax rates, it was also a result of these firms using Ireland to directly access the European labour market. We evidence this contention via sectoral and geographic analyses while simultaneously showing that Irish fiscal policies have not redistributed gains from the recovery to the broader population. As a result, the economic recovery has been most actively felt by those in the FDI sectors, including foreign-national workers from the EU and beyond. We suggest that this experience indicates that Ireland’s FDI-led model of economic development has created clear winners and losers, with significant distributional implications. The FDI growth regime been made possible by inward migration and European integration, but given the unequal distribution of the economic benefits that this generates, it is unlikely to be politically, or electorally, sustainable.