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Does foreign investment improve or worsens productivity? a panel var analysis

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  • Carlos Chavez

    (Universidad Nacional Mayor de San Marcos – Lima - Perú)

Abstract

The paper studies the effects of Foreign Direct Investment (FDI) on productivity. I make two hypotheses, the first one is that foreign firms consider initial stock allocations of capital and human capital to decide what kind of investment to make. The second one is that if the foreign firms make investment, the productivity will increase in countries with higher stock allocations and human capital and will decrease for countries with lower stock allocations and human capital. The methodology I useis a Panel VAR whose estimator is System GMM. The results found show that there are positive impacts of Foreign Direct Investment (FDI) on productivity for countries with a high degree of financial development and high-income level while negative impacts on countries with a low degree of financial development and low-income level in most estimates.

Suggested Citation

  • Carlos Chavez, 2023. "Does foreign investment improve or worsens productivity? a panel var analysis," Revista de Economía y Finanzas (REyF), Asociación Cuadernos de Economía, vol. 1(1), pages 49-72, Enero.
    • Handle: RePEc:cud:journ2:v:1:y:2023:i:1:p:49-72
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    More about this item

    Keywords

    Productividad; Capital humano; Inversiones internacionales;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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