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FDI and Total Factor Productivity Growth: New Macro Evidence

Author

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  • Botirjan Baltabaev

Abstract

Although the role of FDI in facilitating technology transfer is well-known in the literature, empirical evidence regarding the effect of FDI on growth is mixed. The contradictory results in the literature may be due to the failure to account for endogeneity and for the abortive capacity of the hosting countries. Using panel data for 49 countries over the period 1974-2008 and the existence of Investment Promotion Agencies in the receiving countries as an instrument, our results show that increased FDI stock leads to higher productivity growth. We also find a significant positive effect on the interaction between FDI stock and distance to the technological frontier, suggesting that the ability of technologically backward countries in absorbing technologies developed at the frontiers increases as more FDI stock is accumulated.

Suggested Citation

  • Botirjan Baltabaev, 2013. "FDI and Total Factor Productivity Growth: New Macro Evidence," Monash Economics Working Papers 27-13, Monash University, Department of Economics.
    • Handle: RePEc:mos:moswps:2013-27
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    File URL: http://www.buseco.monash.edu.au/eco/research/papers/2013/index.html
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    Cited by:

    1. Dierk Herzer & Holger Strulik, 2020. "Religiosity and Long-Run Productivity Growth," Journal of Economics, Management and Religion (JEMAR), World Scientific Publishing Co. Pte. Ltd., vol. 1(01), pages 1-40, July.
    2. Ayesha Ashraf & Dierk Herzer & Peter Nunnenkamp, 2016. "The Effects of Greenfield FDI and Cross-border M&As on Total Factor Productivity," The World Economy, Wiley Blackwell, vol. 39(11), pages 1728-1755, November.
    3. Misztal Piotr, 2020. "Foreign Direct Investment, Production Factors Productivity and Income Inequalities in Selected CEE Countries," TalTech Journal of European Studies, Sciendo, vol. 10(1), pages 146-172, June.
    4. Ronald Ebenezer Essel, 2023. "Foreign direct investment, technological spillover, and total factor productivity growth in Ghana," SN Business & Economics, Springer, vol. 3(8), pages 1-34, August.
    5. Sicong Li, 2020. "Determinants of Chinese Direct Investment in Central-East Europe under the Belt and Road Initiative Framework: A Panel Data Analysis," International Journal of Innovation and Economic Development, Inovatus Services Ltd., vol. 6(4), pages 62-81, October.
    6. Sandjong Tomi, Diderot Guy D'Estaing, 2015. "Foreign direct investment, economic growth and structural transformation: The case of West African Economies and Monetary Union Countries," MPRA Paper 62230, University Library of Munich, Germany.
    7. Farzaneh KHALILI & Majid AFSHARIRAD & Abdolrahim HASHEMI DIZAJ & Mehdi YAZDANSHENAS BAHOGHOGH, 2021. "Spatial Linkage Between Quality Of Institution, Natural Resources Management With Gdp Per Capita In D8 Countries (Durbin Model In Panel Data)," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(2), pages 239-256, June.
    8. Chen, Guo, 2013. "Health costs, factor productivity and foreign direct investment flows," Master's Theses and Plan B Papers 157717, University of Minnesota, Department of Applied Economics.

    More about this item

    Keywords

    FDI; TFP growth; technological transfer; technology gap; system GMM;
    All these keywords.

    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
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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