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Foreign Direct Investment and Economic Growth: Empirical Evidence from Sectoral Data in Indonesia

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Author Info
Abdul Khaliq (Department of Economics, Andalas University, Indonesia)
Ilan Noy () (Department of Economics, University of Hawaii at Manoa)

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Abstract

The paper investigates the impact of foreign direct investment (FDI) on economic growth using detailed sectoral data for FDI inflows to Indonesia over the period 1997-2006. In the aggregate level, FDI is observed to have a positive effect on economic growth. However, when accounting for the different average growth performance across sectors, the beneficial impact of FDI is no longer apparent. When examining different impacts across sectors, estimation results show that the composition of FDI matters for its effect on economic growth with very few sectors showing positive impact of FDI and one sector even showing a robust negative impact of FDI inflows (mining and quarrying). The sectors examined are: farm food crops, livestock product, forestry, fishery, mining and quarrying, non-oil and gas industry, electricity, gas and water, construction, retail and wholesale trade, hotels and restaurant, transport and communications, and other private and services sectors.

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File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_07-26.pdf
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File Function: First version, 2007
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Publisher Info
Paper provided by University of Hawaii at Manoa, Department of Economics in its series Working Papers with number 200726.

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Length: 27 pages
Date of creation: 01 Oct 2007
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Handle: RePEc:hai:wpaper:200726

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Related research
Keywords: Foreign direct investment; economic growth; Indonesia;

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Find related papers by JEL classification:
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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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.:
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  3. Alfaro, Laura & Chanda, Areendam & Kalemli-Ozcan, Sebnem & Sayek, Selin, 2004. "FDI and economic growth: the role of local financial markets," Journal of International Economics, Elsevier, vol. 64(1), pages 89-112, October. [Downloadable!] (restricted)
    Other versions:
  4. 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. [Downloadable!] (restricted)
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  8. Archanun Kohpaiboon, 2003. "Foreign trade regimes and the FDI-Growth Nexus: a case study of Thailand," The Journal of Development Studies, Taylor and Francis Journals, vol. 40(2), pages 55-69, January. [Downloadable!] (restricted)
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  15. Manuel R. AGOSIN & Ricardo MAYER, 2000. "Foreign Investment In Developing Countries, Does It Crowd In Domestic Investment?," UNCTAD Discussion Papers 146, United Nations Conference on Trade and Development. [Downloadable!]
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  16. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October. [Downloadable!] (restricted)
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  17. Barrell, Ray & Pain, Nigel, 1997. "Foreign Direct Investment, Technological Change, and Economic Growth within Europe," Economic Journal, Royal Economic Society, vol. 107(445), pages 1770-86, November. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, 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.)

  1. Tam Bang Vu & Ilan Noy, 2007. "Sectoral Analysis of Foreign Investment and Growth In the Developed Countries," Working Papers 200725, University of Hawaii at Manoa, Department of Economics. [Downloadable!]
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