Advanced Search
MyIDEAS: Login to save this paper or follow this series

The FDI-Growth Nexus in Latin America: The Role of Source Countries and Local Conditions

Contents:

Author Info

  • Patricia Prüfer
  • Gabriele Tondl

Abstract

Foreign Direct Investment (FDI) has surged in Latin America (LA) since the mid 1990s. European and North American FDI is of capital importance. We investigate the FDI-growth nexus in LA allowing for different source countries, regional heterogeneity, more than 20 growth determinants, and interaction terms with FDI. We use Bayesian Model Averaging to address model uncertainty and to select the best models and most robust parameters. The principal finding is that a positive FDI-growth nexus in LA requires a functioning legal framework and macroeconomic stability. We also find that European FDI is only indirectly correlated with productivity growth, whereas North American FDI is more robust and, thus, directly correlated with productivity growth.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.degit.ifw-kiel.de/papers/degit_14/c014_025.pdf
Our checks indicate that this address may not be valid because: 500 Can't connect to www.degit.ifw-kiel.de:80 (Bad hostname). If this is indeed the case, please notify (Michaela Rank)
Download Restriction: no

Bibliographic Info

Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c014_025.

as in new window
Length: 37 pages
Date of creation: Jun 2009
Date of revision:
Handle: RePEc:deg:conpap:c014_025

Contact details of provider:
Postal: Kiellinie 66, D-24105 Kiel
Phone: +49 431 8814-206
Fax: +49 431 85853
Email:
Web page: http://www.degit.ifw-kiel.de/
More information through EDIRC

Related research

Keywords: FDI-growth nexus; Latin America; Model uncertainty; Bayesian model averaging;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Carmen Fernandez & Eduardo Ley & Mark Steel, 1999. "Model uncertainty in cross-country growth regressions," Econometrics 9903003, EconWPA, revised 06 Oct 2001.
  2. Beata Smarzynska Javorcik, 2004. "Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers Through Backward Linkages," American Economic Review, American Economic Association, vol. 94(3), pages 605-627, June.
  3. Benhabib, Jess & Spiegel, Mark M., 2005. "Human Capital and Technology Diffusion," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 13, pages 935-966 Elsevier.
  4. Tavares, Jose & Wacziarg, Romain, 2001. "How democracy affects growth," European Economic Review, Elsevier, vol. 45(8), pages 1341-1378, August.
  5. Malik, Adeel & Temple, Jonathan R.W., 2009. "The geography of output volatility," Journal of Development Economics, Elsevier, vol. 90(2), pages 163-178, November.
  6. Laura Alfaro & Andrés Rodriguez-Clare, 2004. "Multinationals and Linkages: An Empirical Investigation," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
  7. Roberto Leon Gonzalez & Daniel Montolio Estivill, 2003. "Growth, Convergence and Public Investment. A Bayesian Model Averaging Approach," Working Papers in Economics 106, Universitat de Barcelona. Espai de Recerca en Economia.
  8. Sebnem Kalemli-Ozcan & Laura Alfaro & Selin Sayek & Areendam Chanda, 2002. "FDI and Economic Growth: The Role of Local Financial Markets," Macroeconomics 0212007, EconWPA.
  9. Aitken, Brian & Hanson, Gordon H. & Harrison, Ann E., 1997. "Spillovers, foreign investment, and export behavior," Journal of International Economics, Elsevier, vol. 43(1-2), pages 103-132, August.
  10. de Mello, Luiz R, Jr, 1999. "Foreign Direct Investment-Led Growth: Evidence from Time Series and Panel Data," Oxford Economic Papers, Oxford University Press, vol. 51(1), pages 133-51, January.
  11. Beata Smarzynska Javorcik & Mariana Spatareanu, 2003. "To share or not to share : does local participation matter for spillovers from foreign direct investment?," Policy Research Working Paper Series 3118, The World Bank.
  12. Garett Jones & W. Schneider, 2006. "Intelligence, Human Capital, and Economic Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach," Journal of Economic Growth, Springer, vol. 11(1), pages 71-93, 03.
  13. Johnson, Paul & Durlauf, Steven N & Temple, Johnathan R. W., 2004. "Growth Econometrics," Vassar College Department of Economics Working Paper Series 61, Vassar College Department of Economics.
    • Durlauf, Steven N. & Johnson, Paul A. & Temple, Jonathan R.W., 2005. "Growth Econometrics," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 8, pages 555-677 Elsevier.
  14. Ventura, Jaume, 2005. "A Global View of Economic Growth," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 22, pages 1419-1497 Elsevier.
  15. Blomstrom, Magnus & Kokko, Ari, 1997. "How foreign investment affects host countries," Policy Research Working Paper Series 1745, The World Bank.
  16. Bengoa, Marta & Sanchez-Robles, Blanca, 2003. "Foreign direct investment, economic freedom and growth: new evidence from Latin America," European Journal of Political Economy, Elsevier, vol. 19(3), pages 529-545, September.
  17. Sala-i-Martin, Xavier, 1997. "I Just Ran Two Million Regressions," American Economic Review, American Economic Association, vol. 87(2), pages 178-83, May.
  18. V. N. Balasubramanyam & M. Salisu & David Sapsford, 1999. "Foreign direct investment as an engine of growth," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 8(1), pages 27-40.
  19. Bruce A. Blonigen & Miao Wang, 2004. "Inappropriate Pooling of Wealthy and Poor Countries in Empirical FDI Studies," Working Papers and Research 0903, Marquette University, Center for Global and Economic Studies and Department of Economics.
  20. William Easterly, 2003. "National Policies and Economic Growth: A Reappraisal," Working Papers 27, Center for Global Development.
  21. Luiz de Mello, 1997. "Foreign direct investment in developing countries and growth: A selective survey," Journal of Development Studies, Taylor & Francis Journals, vol. 34(1), pages 1-34.
  22. Chris Papageorgiou & Christian Henn & Theo S. Eicher, 2008. "Trade Creation and Diversion Revisited," IMF Working Papers 08/66, International Monetary Fund.
  23. Ley, Eduardo & Steel, Mark F.J., 2008. "On the Effect of Prior Assumptions in Bayesian Model Averaging with Applications to Growth Regression," MPRA Paper 6773, University Library of Munich, Germany, revised 06 Jan 2008.
  24. Xavier Sala-I-Martin & Gernot Doppelhofer & Ronald I. Miller, 2004. "Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach," American Economic Review, American Economic Association, vol. 94(4), pages 813-835, September.
  25. Gabriele Tondl & Jorge A. Fornero, 2010. "Sectoral productivity and spillover effects of FDI in Latin America," FIW Working Paper series 053, FIW.
  26. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
  27. Jonathan Temple, 2000. "Growth Effects of Education and Social Capital in the OECD Countries," OECD Economics Department Working Papers 263, OECD Publishing.
  28. Holger Görg & David Greenaway, 2004. "Much Ado about Nothing? Do Domestic Firms Really Benefit from Foreign Direct Investment?," World Bank Research Observer, World Bank Group, vol. 19(2), pages 171-197.
  29. Carmen Fernández & Eduardo Ley & Mark F. J. Steel, . "Benchmark priors for Bayesian Model averaging," Working Papers 98-06, FEDEA.
  30. Arnold, Jens M. & Javorcik, Beata S. & Mattoo, Aaditya, 2011. "Does services liberalization benefit manufacturing firms?: Evidence from the Czech Republic," Journal of International Economics, Elsevier, vol. 85(1), pages 136-146, September.
  31. Vittorio Corbo & Leonardo Hernández & Fernando Parro, 2005. "Institutions, Economic Policies and Growth: Lessons From the Chilean Experience," Working Papers Central Bank of Chile 317, Central Bank of Chile.
  32. Alesina, Alberto & Spolaore, Enrico & Wacziarg, Romain, 2005. "Trade, Growth and the Size of Countries," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 23, pages 1499-1542 Elsevier.
  33. Theo Eicher & Christian Henn & Chris Papageorgiou, 2010. "Trade Creation and Diversion Revisited: Accounting for Model Uncertainty and Natural Trading Partner Effects," Working Papers UWEC-2007-18-P, University of Washington, Department of Economics.
  34. Rodriguez-Clare, Andres, 1996. "Multinationals, Linkages, and Economic Development," American Economic Review, American Economic Association, vol. 86(4), pages 852-73, September.
  35. Jose De Gregorio, 1991. "Economic Growth in Latin America," IMF Working Papers 91/71, International Monetary Fund.
  36. Levy Yeyati, Eduardo & Panizza, Ugo & Stein, Ernesto, 2007. "The cyclical nature of North-South FDI flows," Journal of International Money and Finance, Elsevier, vol. 26(1), pages 104-130, February.
  37. Maurice Kugler, 2006. "Spillovers From Foreign Direct Investment:Within Or Between Industries?," BORRADORES DE ECONOMIA 003523, BANCO DE LA REPÚBLICA.
  38. Sachs, Jeffrey D. & Warner, Andrew M., 1999. "The big push, natural resource booms and growth," Journal of Development Economics, Elsevier, vol. 59(1), pages 43-76, June.
  39. Magnus, J.R. & Powell, O.R. & Prüfer, P., 2008. "A Comparison of Two Averaging Techniques with an Application to Growth Empirics," Discussion Paper 2008-39, Tilburg University, Center for Economic Research.
  40. Francisco Alcalá & Antonio Ciccone, 2003. "Trade and Productivity," Working Papers 12, Barcelona Graduate School of Economics.
  41. Theo Eicher & Chris Papageogiou & Adrian E Raftery, 2007. "Default Priors and Predictive Performance in Bayesian Model Averaging, with Application to Growth Determinants," Working Papers UWEC-2007-25-P, University of Washington, Department of Economics.
  42. Robert J. Barro & Jong-Wha Lee, 2000. "International Data on Educational Attainment Updates and Implications," NBER Working Papers 7911, National Bureau of Economic Research, Inc.
  43. L Alan Winters, 2004. "Trade Liberalisation and Economic Performance: An Overview," Economic Journal, Royal Economic Society, vol. 114(493), pages F4-F21, 02.
  44. James R. Markusen & Anthony J. Venables, 1997. "Foreign Direct Investment as a Catalyst for Industrial Development," NBER Working Papers 6241, National Bureau of Economic Research, Inc.
  45. Ann E. Harrison & Brian J. Aitken, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, vol. 89(3), pages 605-618, June.
  46. Magnus Blomstrom & Edward N. Wolff, 1989. "Multinational Corporations and Productivity Convergence in Mexico," NBER Working Papers 3141, National Bureau of Economic Research, Inc.
  47. Henderson, J. Vernon, 2005. "Urbanization and Growth," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 24, pages 1543-1591 Elsevier.
  48. Steven N. Durlauf & Andros Kourtellos & Chih Ming Tan, 2007. "Are any Growth Theories Robust?," University of Cyprus Working Papers in Economics 2-2007, University of Cyprus Department of Economics.
  49. Jimenez, Emmanuel, 1986. "The Public Subsidization of Education and Health in Developing Countries: A Review of Equity and Efficiency," World Bank Research Observer, World Bank Group, vol. 1(1), pages 111-29, January.
  50. Fagerberg, Jan, 1994. "Technology and International Differences in Growth Rates," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1147-75, September.
  51. Facundo Albornoz & Jayasri Dutta, 2007. "Political Regimes and Economic Growth in Latin America," Discussion Papers 07-06, Department of Economics, University of Birmingham.
  52. Acemoglu, Daron & Johnson, Simon & Robinson, James A., 2005. "Institutions as a Fundamental Cause of Long-Run Growth," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 6, pages 385-472 Elsevier.
  53. N. Gregory Mankiw, 1995. "The Growth of Nations," Harvard Institute of Economic Research Working Papers 1732, Harvard - Institute of Economic Research.
  54. Magnus, Jan R. & Powell, Owen & Prüfer, Patricia, 2010. "A comparison of two model averaging techniques with an application to growth empirics," Journal of Econometrics, Elsevier, vol. 154(2), pages 139-153, February.
  55. Javorcik, Beata S. & Saggi, Kamal & Spatareanu, Mariana, 2004. "Does it matter where you come from? vertical spillovers from foreign direct investment and the nationality of investors," Policy Research Working Paper Series 3449, The World Bank.
  56. Arnold, Jens & Mattoo, Aaditya & Smarzynska Javorcik, Beata, 2006. "Does Services Liberalization Benefit Manufacturing Firms?," CEPR Discussion Papers 5902, C.E.P.R. Discussion Papers.
  57. Romain Wacziarg, 2002. "Review of Easterly's The Elusive Quest for Growth," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 907-918, September.
  58. Ana Cuadros & Vicente Orts & Maite Alguacil, 2004. "Openness and Growth: Re-Examining Foreign Direct Investment, Trade and Output Linkages in Latin America," Journal of Development Studies, Taylor & Francis Journals, vol. 40(4), pages 167-192.
  59. Winford H. Masanjala & Chris Papageorgiou, 2008. "Rough and lonely road to prosperity: a reexamination of the sources of growth in Africa using Bayesian model averaging," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(5), pages 671-682.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Magnus, J.R. & Powell, O.R. & Prüfer, P., 2008. "A Comparison of Two Averaging Techniques with an Application to Growth Empirics," Discussion Paper 2008-39, Tilburg University, Center for Economic Research.
  2. Gabriele Tondl & Jorge A. Fornero, 2010. "Sectoral productivity and spillover effects of FDI in Latin America," FIW Working Paper series 053, FIW.
  3. Magnus, Jan R. & Powell, Owen & Prüfer, Patricia, 2010. "A comparison of two model averaging techniques with an application to growth empirics," Journal of Econometrics, Elsevier, vol. 154(2), pages 139-153, February.
  4. Antonakakis, Nikolaos & Tondl, Gabriele, 2012. "Do determinants of FDI to developing countries differ among OECD investors? Insights from Bayesian model averaging," Discussion Papers 1/12, Europa-Kolleg Hamburg, Institute for European Integration.
  5. Alguacil, M. & Cuadros, A. & Orts, V., 2011. "Inward FDI and growth: The role of macroeconomic and institutional environment," Journal of Policy Modeling, Elsevier, vol. 33(3), pages 481-496, May.
  6. Balatoni, András & Pitz, Mónika, 2012. "A működőtőke hatása a bruttó nemzeti jövedelemre Magyarországon
    [The effect of direct investment on Hungary s gross national income]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(1), pages 1-30.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:deg:conpap:c014_025. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michaela Rank).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.