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Does FDI Accelerate Economic Growth? The OECD Experience Based on Panel Data Estimates for the Period 1980-2004

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Author Info

  • Ghosh Madanmohan

    ()
    (Department of Finance Canada)

  • Wang Weimin

    ()
    (Human Resources and Skills Development Canada)

Abstract

Although empirical literature offers rich insights on the relationship of FDI and economic growth, it provides mixed evidence on the existence of productivity externalities in the host country generated by foreign multinational companies. A branch of literature suggests that the positive impact of FDI is conditional on countries stock of human capital or a threshold absorptive capacity. Most of the studies that came up with these conclusions are either based on developing or a mix of developing and developed country experiences. There is a dearth of literature explicitly focused on developed country experiences. Moreover, most literature has focused on the impact of inward FDI on host country economic growth. Does outward FDI exert any influence on source country economic growth? This paper addresses these issues using panel time series data from 25 OECD countries for the period 1980-2004 in a cross-country regression framework. It finds that both inward and outward are positively correlated with host and source country economic growth. However, the impact of FDI on economic growth is moderate. Results suggest that the elasticity of GDP growth with respect to both inward and outward FDI in the host and source countries is about 0.01.

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Bibliographic Info

Article provided by De Gruyter in its journal Global Economy Journal.

Volume (Year): 9 (2010)
Issue (Month): 4 (January)
Pages: 1-23

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Handle: RePEc:bpj:glecon:v:9:y:2010:i:4:n:1

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Cited by:
  1. Neil Dias Karunaratne, 2012. "Total Factor Productivity & Foreign direct investment in OECD countries - A Paneldata Econometric Analysis," Discussion Papers Series 465, School of Economics, University of Queensland, Australia.
  2. Clark Don P. & Highfill Jannett & de Oliveira Campino Jonas & Rehman Scheherazade S., 2011. "FDI, Technology Spillovers, Growth, and Income Inequality: A Selective Survey," Global Economy Journal, De Gruyter, vol. 11(2), pages 1-44, July.
  3. Neil Dias Karunaratne, 2013. "Perspectives on Total Factor Productivity and Foreign Direct Investment in OECD Countries based on Panel Data Econometrics," Journal of Knowledge Management, Economics and Information Technology, ScientificPapers.org, vol. 3(2), pages 8, April.

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