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Growth effects of FDI in 80 developing economies: the role of policy reforms and institutional constraints

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  • Krishna Chaitanya Vadlamannati
  • Artur Tamazian
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    Abstract

    Theoretical and empirical literatures have identified several channels through which foreign direct investment (FDI) influences economic growth. This paper examines the impact of FDI on economic output growth per worker using aggregate production function augmented with FDI inflows, economic policy reforms and institutional constraints. The paper covers 80 developing countries over the period 1980-2006. We use panel data and employ fixed, random effects and GMM methods for estimation. Our results highlight the importance of FDI, policy reforms and institutional development for growth in developing economies. Finally, we demonstrate that irrespective of reforms and institutions, an increase in FDI affects output growth positively.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/17487870903314583
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Journal of Economic Policy Reform.

    Volume (Year): 12 (2009)
    Issue (Month): 4 ()
    Pages: 299-322

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    Handle: RePEc:taf:jpolrf:v:12:y:2009:i:4:p:299-322

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    Related research

    Keywords: FDI; economic growth; policy reforms; institutional constraints;

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    Cited by:
    1. Huang, Shu-Chin, 2013. "Capital outflow and R&D investment in the parent firm," Research Policy, Elsevier, vol. 42(1), pages 245-260.

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