How Does Foreign Direct Investment Affect Economic Growth
September 1, 1994
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Summary
We test the effect of foreign direct investment (FDI) on economic growth in a cross-country regression framework, utilizing data on FDI flows from industrial countries to 69 developing countries over the last two decades. Our results suggest that FDI is an important vehicle for the transfer of technology, contributing relatively more to growth than domestic investment. However, the higher productivity of FDI holds only when the host country has a minimum threshold stock of human capital. In addition, FDI has the effect of increasing total investment in the economy more than one for one, which suggests the predominance of complementarity effects with domestic firms.
Subject: Education, Foreign corporations, Foreign direct investment, Human capital, Technology
Keywords: capital goods, economic growth, WP
Pages:
26
Volume:
1994
DOI:
Issue:
110
Series:
Working Paper No. 1994/110
Stock No:
WPIEA1101994
ISBN:
9781451853278
ISSN:
1018-5941
