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Economic growth and FDI inflows:a stochastic frontier analysis

Author

Listed:
  • Albert Wijeweera
  • Renato Villano
  • Brian Dollery

    (The Petroleum Institute, UAE
    University of New England, Australia)

Abstract

Despite plausible theoretical grounds for presuming a positive relationship between foreign direct investment inflows (FDI) and economic growth, existing empirical evidence on this nexus is inconclusive. In an effort to add to the empirical literature, this paper estimates the relationship between FDI and the rate of growth of GDP using a stochastic frontier model and employing panel data covering 45 countries over the period 1997 to 2004. We find that FDI inflows exert a positive impact on economic growth only in the presence of a highly skilled labour; corruption has a negative impact on economic growth; and trade openness increases economic growth by means of efficiency gains.

Suggested Citation

  • Albert Wijeweera & Renato Villano & Brian Dollery, 2010. "Economic growth and FDI inflows:a stochastic frontier analysis," Journal of Developing Areas, Tennessee State University, College of Business, vol. 43(2), pages 143-158, January-M.
    • Handle: RePEc:jda:journl:vol.43:year:2010:issue2:pp:143-158
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    Citations

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    Cited by:

    1. Maria Baquero Forero & Takanori Ida & Toshifumi Kuroda, 2015. "Institutions and Cultural Heterogeneity as Determinants of National Income: A Random-coefficients Stochastic Frontier Model," Review of Development Economics, Wiley Blackwell, vol. 19(3), pages 710-724, August.
    2. Anselm Komla Abotsi & Tongyai Iyavarakul, 2015. "Tolerable Level of Corruption for Foreign Direct Investment in Africa," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 9(3), September.
    3. Mohammad Sharif Karimi & Andrzej Cieslik, 2017. "Foreign Knowledge Spillovers and Total Factor Productivity Growth: Evidence from Four ASEAN Countries," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 21(2), pages 267-299, Spring.
    4. Emmanuel Apergis & Nicholas Apergis, 2018. "What is extracted from earth is gold: are rare earths telling a new tale to economic growth?," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 45(1), pages 177-192, January.
    5. Leitão, Nuno Carlos, 2012. "Foreign direct investment and globalization," MPRA Paper 37436, University Library of Munich, Germany.
    6. Camilla Mastromarco & Léopold Simar, 2015. "Effect of FDI and Time on Catching Up: New Insights from a Conditional Nonparametric Frontier Analysis," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 30(5), pages 826-847, August.
    7. Klára Katona, 2018. "Impact of Knowledge Capital on the Production of Hungarian Firms," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 24(2), pages 135-146, May.
    8. Dzingai Francis Chapfuwa & Peter Baur, 2020. "Institutions, Foreign Direct Investment (Fdi) And Economic Growth: Does The Existence Of Strategic Natural Resources Matter?," Review of Socio - Economic Perspectives 202061, Reviewsep.
    9. Mastromarco, Camilla & Simar, Léopold, 2018. "Globalization and productivity: A robust nonparametric world frontier analysis," Economic Modelling, Elsevier, vol. 69(C), pages 134-149.
    10. Asafo-Agyei, George & Kodongo, Odongo, 2022. "Foreign direct investment and economic growth in Sub-Saharan Africa: A nonlinear analysis," Economic Systems, Elsevier, vol. 46(4).
    11. Nuno Carlos LEITÃO, 2013. "A Panel Data Modelling Of Agglomeration And Growth: Cross-Country Evidence," Theoretical and Empirical Researches in Urban Management, Research Centre in Public Administration and Public Services, Bucharest, Romania, vol. 8(1), pages 67-77, February.
    12. 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.
    13. Sibanjan Mishra, 2016. "Macro-economic factors and foreign direct investment in India: a Toda Yamamoto causality approach," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 11(3), pages 195-208.
    14. Tiwari, Aviral & Mutascu, Mihai, 2010. "Economic growth and and FDI in ASIA: A panel data approach," MPRA Paper 28172, University Library of Munich, Germany.
    15. Samuel Antwi & Prince Yeboah Boateng & Awudu Salley, 2021. "?he effect of foreign direct investment on economic growth in Ghana: the role of exchange rate volatility," Bulletin of Applied Economics, Risk Market Journals, vol. 8(1), pages 81-96.
    16. Polyxeni Kechagia & Theodore Metaxas, 2022. "FDI and Institutions in BRIC and CIVETS Countries: An Empirical Investigation," Economies, MDPI, vol. 10(4), pages 1-23, March.
    17. Mastromarco, Camilla & Simar, Leopold, 2014. "Global Dependence and Productivity: A Robust Nonparametric World Frontier Analysis," LIDAM Discussion Papers ISBA 2014049, Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA).
    18. Jiang, Crystal X. & Yang, Qin & Li, Sali & Wang, Yong, 2011. "The moderating effect of foreign direct investment intensity on local firms' intangible resources investment and performance implications: A case from China," Journal of International Management, Elsevier, vol. 17(4), pages 291-302.
    19. Ruranga, Charles & Ocaya, Bruno & Kaberuka, William, 2014. "Analysis of Rwandan Economic Performance Before and After the 1994 Genocide," African Journal of Economic Review, African Journal of Economic Review, vol. 2(2), July.
    20. Amadou Maiga Ousseini & Hu Xiaojuan & Metuge Mekongcho Terence & Kigbadjah Coulibaly Salifou, 2018. "Effects of Economic Globalization, Foreign Capital Influx on Export in ECOWAS," Global Economy Journal, De Gruyter, vol. 18(4), pages 1-16, December.
    21. Apergis, Nicholas & Poufinas, Thomas, 2020. "The role of insurance growth in economic growth: Fresh evidence from a panel of OECD countries," The North American Journal of Economics and Finance, Elsevier, vol. 53(C).
    22. Sucharita Ghosh & Camilla Mastromarco, 2013. "Cross-border Economic Activities, Human Capital and Efficiency: A Stochastic Frontier Analysis for OECD Countries," The World Economy, Wiley Blackwell, vol. 36(6), pages 761-785, June.
    23. Mary Oluwatoyin Agboola & Festus Victor Bekun & Daniel Balsalobre-Lorente, 2021. "Implications of Social Isolation in Combating COVID-19 Outbreak in Kingdom of Saudi Arabia: Its Consequences on the Carbon Emissions Reduction," Sustainability, MDPI, vol. 13(16), pages 1-16, August.
    24. Md. Qamruzzaman & Salma Karim, 2020. "Nexus between Economic Volatility, Trade Openness and FDI: An Application of ARDL, NARDL and Asymmetric Causality," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(7), pages 790-807, July.
    25. O. K. Adeleke, 2023. "FDI inflows and stock market development in Nigeria," Journal of Economic Policy and Management Issues, JEPMI, vol. 2(2), pages 19-30.

    More about this item

    Keywords

    Economic growth; foreign direct investment inflows;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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