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The Investment Development Path Hypothesis: a Panel Data Approach to the Portuguese Case

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  • Miguel Fonseca

    (Faculdade de Economia, Universidade do Porto)

Abstract

Looking at the transformations that took place in the world economy after Second World War, as a result of liberalization, deregulation and market opening process, one of the most striking features was the significant expansion of Foreign Direct Investment. So, the main purpose of this paper is to discuss the positioning of Portugal – a small open economy in the extreme west of Europe - in this context. Our analysis is based on the Investment Development Path (IDP) theory, according to which the inward and outward investment position of a country is tied with its economic development. In the present research, this hypothesis is estimated empirically for Portugal and other 24 countries in different stages of development, between 1990 and 2006, using fixed-effects panel data models. Generally, our results find support for IDP paradigm, although it is impossible to capture all the stages predicted theoretically, given the lack of heterogeneity between the most countries of our sample and the relatively short time period considered.

Suggested Citation

  • Miguel Fonseca, 2008. "The Investment Development Path Hypothesis: a Panel Data Approach to the Portuguese Case," FEP Working Papers 303, Universidade do Porto, Faculdade de Economia do Porto.
    • Handle: RePEc:por:fepwps:303
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    References listed on IDEAS

    as
    1. Christian Bellak, 2000. "The Investment Development Path of Austria," Department of Economics Working Papers wuwp075, Vienna University of Economics and Business, Department of Economics.
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    More about this item

    Keywords

    Multinational Enterprises; Foreign Direct Investment; Investment Development Path; Portugal; Spain;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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