Foreign Direct Investment and Economic Growth: An Increasingly Endogenous Relationship [An article from: World Development]

This digital document is a journal article from World Development, published by Elsevier in 2005. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
This paper investigates whether foreign direct investment (FDI) affects economic growth based on a panel of data for 84 countries over the period 1970-99. Both single equation and simultaneous equation system techniques are applied to examine this relationship. A significant endogenous relationship between FDI and economic growth is identified from the mid-1980s onwards. FDI not only directly promotes economic growth by itself but also indirectly does so via its interaction terms. The interaction of FDI with human capital exerts a strong positive effect on economic growth in developing countries, while that of FDI with the technology gap has a significant negative impact.