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Sectoral Analysis of Foreign Investment and Growth In the Developed Countries

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  • Tam Bang Vu

    () (College of Business and Economics, University of Hawaii at Hilo)

  • Ilan Noy

    () (Department of Economics, University of Hawaii at Manoa)

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Abstract

Empirical studies on FDI and growth in developed countries have yielded conflicting results using cross-country regressions. We use sectoral data for a group of six country members of the Organization for Economic Cooperation and Development. Our paper is the first to identify the sector-specific impact of FDI on growth in the developed countries. Our results show that FDI might have positive or negative effect on economic growth operating directly and through its interaction with labor. Moreover, we find the effects seem to be very different across countries and economic sectors.

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File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_07-25.pdf
File Function: First version, 2007
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Bibliographic Info

Paper provided by University of Hawaii at Manoa, Department of Economics in its series Working Papers with number 200725.

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Length: 24 pages
Date of creation: 30 Sep 2007
Date of revision:
Handle: RePEc:hai:wpaper:200725

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Keywords: Foreign direct investment; growth;

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References

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  1. 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.
  2. Luiz de Mello, 1997. "Foreign direct investment in developing countries and growth: A selective survey," The Journal of Development Studies, Taylor and Francis Journals, vol. 34(1), pages 1-34.
  3. Elhanan Helpman & David T. Coe & Alexander W. Hoffmaister, 1994. "North-South R&D Spillovers," IMF Working Papers 94/144, International Monetary Fund.
  4. Abdul Khaliq & Ilan Noy, 2007. "Foreign Direct Investment and Economic Growth: Empirical Evidence from Sectoral Data in Indonesia," Working Papers 200726, University of Hawaii at Manoa, Department of Economics.
  5. Carlin, Wendy & Mayer, Colin, 1999. "Finance, Investment and Growth," CEPR Discussion Papers 2233, C.E.P.R. Discussion Papers.
  6. Sebnem Kalemli-Ozcan & Laura Alfaro & Selin Sayek & Areendam Chanda, 2002. "FDI and Economic Growth: The Role of Local Financial Markets," Macroeconomics 0212007, EconWPA.
  7. Tam B. Vu & Byron Gangnes & Ilan Noy, 2008. "Is Foreign Direct Investment Good for Growth? Evidence from Sectoral Analysis of China and Vietnam," Working Papers 200801, University of Hawaii at Manoa, Department of Economics.
  8. Li, Xiaoying & Liu, Xiaming, 2005. "Foreign Direct Investment and Economic Growth: An Increasingly Endogenous Relationship," World Development, Elsevier, vol. 33(3), pages 393-407, March.
  9. Hsiao, Cheng & Shen, Yan, 2003. "Foreign Direct Investment and Economic Growth: The Importance of Institutions and Urbanization," Economic Development and Cultural Change, University of Chicago Press, vol. 51(4), pages 883-96, July.
  10. Eduardo Borensztein & Jose De Gregorio & Jong-Wha Lee, 1995. "How Does Foreign Direct Investment Affect Economic Growth?," NBER Working Papers 5057, National Bureau of Economic Research, Inc.
  11. Balcao Reis, Ana, 2001. "On the welfare effects of foreign investment," Journal of International Economics, Elsevier, vol. 54(2), pages 411-427, August.
  12. Findlay, Ronald, 1978. "Relative Backwardness, Direct Foreign Investment, and the Transfer of Technology: A Simple Dynamic Model," The Quarterly Journal of Economics, MIT Press, vol. 92(1), pages 1-16, February.
  13. Magnus Blomstrom & Robert E. Lipsey & Mario Zejan, 1994. "What Explains Developing Country Growth?," NBER Working Papers 4132, National Bureau of Economic Research, Inc.
  14. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
  15. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November.
  16. Laura Alfaro & Andrew Charlton, 2007. "Growth and the Quality of Foreign Direct Investment: Is All FDI Equal?," CEP Discussion Papers dp0830, Centre for Economic Performance, LSE.
  17. Peter Kennedy, 2003. "A Guide to Econometrics, 5th Edition," MIT Press Books, The MIT Press, edition 5, volume 1, number 026261183x.
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Cited by:
  1. Maryia Akulava & Ganna Vakhitova, 2010. "The Impact of FDI on Firm’s Performance Across Sectors: Evidence from Ukraine," Discussion Papers 26, Kyiv School of Economics.

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