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Foreign Capital, Human Capital, and Efficiency: A Stochastic Frontier Analysis for Developing Countries

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  • Mastromarco, Camilla
  • Ghosh, Sucharita

Abstract

Summary We use stochastic Frontier analysis to study which of the three channels of technology diffusion, foreign direct investment (FDI), imports of machinery and equipment, or imports of research and development (R&D) expenditures, affect the total factor productivity of developing countries. We also analyze whether a developing country's openness to technology diffusion is affected by their existing levels of human capital. We find that FDI, imported capital goods, and imported R&D are all important channels for improving efficiency, as is human capital accumulation. However, the positive effect of FDI, imported capital goods, and imported R&D depends crucially on the level of accumulated human capital. In addition, we find that in the process of technology diffusion, the impact of formal education is more important for imported R&D than it is for imported capital and FDI, whereas the opposite is true for learning by doing, which is found to be more important for knowledge diffusion through FDI and imported capital.

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Bibliographic Info

Article provided by Elsevier in its journal World Development.

Volume (Year): 37 (2009)
Issue (Month): 2 (February)
Pages: 489-502

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Handle: RePEc:eee:wdevel:v:37:y:2009:i:2:p:489-502

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Web page: http://www.elsevier.com/locate/worlddev

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Keywords: technology diffusion foreign capital human capital stochastic Frontier model;

References

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Cited by:
  1. Arazmuradov, Annageldy & Martini, Gianmaria & Scotti, Davide, 2014. "Determinants of total factor productivity in former Soviet Union economies: A stochastic frontier approach," Economic Systems, Elsevier, vol. 38(1), pages 115-135.
  2. Wang, Miao & Wong, M. C. Sunny, 2012. "International R&D Transfer and Technical Efficiency: Evidence from Panel Study Using Stochastic Frontier Analysis," World Development, Elsevier, vol. 40(10), pages 1982-1998.
  3. Fu, Yuming & Gabriel, Stuart A., 2012. "Labor migration, human capital agglomeration and regional development in China," Regional Science and Urban Economics, Elsevier, vol. 42(3), pages 473-484.

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