Post-Manichean Economics: Foreign Investment, State Capacity and Economic Development in Transition Economies
AbstractThis paper evaluates the role of foreign direct investment (FDI) in the transition from socialism to capitalism. Fixed-effects panel regressions indicate that FDI and domestic investment have an equal effect on growth in the first year of investment, but over time FDI is associated with greater growth than domestic investment. However, this positive impact of FDI turns out to be contingent upon the presence of a relatively well-functioning state in the host economy; in the absence of such a state, the net effect of FDI on economic development may be negative. All findings are robust in light of instrumental variable estimation, which is used to account for potential endogeneity problems.
Download InfoIf 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.
Bibliographic InfoPaper provided by Political Economy Research Institute, University of Massachusetts at Amherst in its series Working Papers with number wp227.
Date of creation: 2010
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-06-26 (All new papers)
- NEP-FDG-2010-06-26 (Financial Development & Growth)
- NEP-TRA-2010-06-26 (Transition Economics)
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.:
- Dolan, Michael B. & Tomlin, Brian W., 1980. "First World-Third World linkages: external relations and economic development," International Organization, Cambridge University Press, vol. 34(01), pages 41-63, December.
- Green, Donald P. & Kim, Soo Yeon & Yoon, David H., 2001. "Dirty Pool," International Organization, Cambridge University Press, vol. 55(02), pages 441-468, March.
- Hausman, Jerry A, 1978.
"Specification Tests in Econometrics,"
Econometric Society, vol. 46(6), pages 1251-71, November.
- Baltagi, Badi H. & Wu, Ping X., 1999. "Unequally Spaced Panel Data Regressions With Ar(1) Disturbances," Econometric Theory, Cambridge University Press, vol. 15(06), pages 814-823, December.
- Vladimir Popov, 2001. "Reform Strategies and Economic Performance: The Russian Far East as Compared to Other Regions," Comparative Economic Studies, Palgrave Macmillan, vol. 43(4), pages 33-66, December.
- Tain-jy Chen & Yi-Ping Chen, 1995. "Foreign Direct Investment," Industry and Innovation, Taylor & Francis Journals, vol. 2(1), pages 57-68.
- T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
- William Easterly, 2003. "Can Foreign Aid Buy Growth?," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 23-48, Summer.
- John King, 2011. "Foreign Direct Investment and Pollution Havens," Journal of Economics and Econometrics, Economics and Econometrics Research Institute (EERI), Brussels, vol. 54(1), pages 39-47.
- Dutt, Amitava Krishna, 1997. "The pattern of direct foreign investment and economic growth," World Development, Elsevier, vol. 25(11), pages 1925-1936, November.
- Swan, Trevor W, 2002. "Economic Growth," The Economic Record, The Economic Society of Australia, vol. 78(243), pages 375-80, December.
- Bloom, David E & Williamson, Jeffrey G, 1998.
"Demographic Transitions and Economic Miracles in Emerging Asia,"
World Bank Economic Review,
World Bank Group, vol. 12(3), pages 419-55, September.
- David E. Bloom & Jeffrey G. Williamson, 1997. "Demographic Transitions and Economic Miracles in Emerging Asia," NBER Working Papers 6268, National Bureau of Economic Research, Inc.
- Mann, Catherine L, 1991. "Industry Restructuring in East-Central Europe: The Challenge and the Role for Foreign Investment," American Economic Review, American Economic Association, vol. 81(2), pages 181-84, May.
- Bornschier, Volker, 1980. "Multinational corporations and economic growth : A cross-national test of the decapitalization thesis," Journal of Development Economics, Elsevier, vol. 7(2), pages 191-210, April.
- Cingolani, Luciana & Thomsson, Kaj & de Crombrugghe, Denis, 2013. "Minding Weber more than ever? The impacts of State Capacity and Bureaucratic Autonomy on development goals," MERIT Working Papers 052, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
- Cingolani, Luciana, 2013. "The State of State Capacity: a review of concepts, evidence and measures," MERIT Working Papers 053, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Judy Fogg).
If references are entirely missing, you can add them using this form.