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Foreign Direct Investment, human capital and non-linearities in economic growth

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  • Constantina Kottaridi
  • Thanasis Stengos

Abstract

This paper makes a contribution to the existing literature on the foreign direct investment (FDI) and economic growth nexus by contrasting past empirical evidence and conventional wisdom and arriving at some interesting new results. By applying non-parametric methods, and thus taking into account nonlinear effects of initial income and human capital on economic growth, we explore the FDI effect on growth in much greater detail than previous studies. Our findings not only confirm the nonlinear effect of human capital in the presence of FDI inflows but also suggest that FDI inflows are growth enhancing in the middle-income countries while there is a ‘two-regime FDI effect for high income countries. This new finding appears to be independent of OECD country membership.

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Bibliographic Info

Paper provided by University of Peloponnese, Department of Economics in its series Working Papers with number 019.

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Length: 36 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:uop:wpaper:019

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Keywords: cross country growth regressions; FDI; human capital; semi-parametric model;

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Citations

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Cited by:
  1. Henderson, Daniel J. & Kumbhakar, Subal C. & Parmeter, Christopher F., 2012. "A simple method to visualize results in nonlinear regression models," Economics Letters, Elsevier, vol. 117(3), pages 578-581.
  2. Savoiu, Gheorghe & Dinu, Vasile & Ciuca, Suzana, 2013. "Foreign Direct Investment based on Country Risk and other Macroconomic Factors. Econometric Models for Romanian Economy," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 39-61, March.
  3. Carike Claassen & Elsabé Loots & Henri Bezuidenhout, 2011. "Chinese Foreign Direct Investment in Africa," Working Papers 261, Economic Research Southern Africa.
  4. Razzak Weshah A. & Bentour El M., 2013. "Do Developing Countries Benefit from Foreign Direct Investments? An Analysis of Some Arab and Asian Countries," Review of Middle East Economics and Finance, De Gruyter, vol. 9(3), pages 357-388, December.
  5. Aurangzeb Zeb & Thanasis Stengos, 2013. "The Role of Foreign Direct Investment (FDI) in a Dualistic Growth Framework: An Application of Smooth Coefficient Semi-parametric Approach," Working Paper Series 55_13, The Rimini Centre for Economic Analysis.
  6. Wen-Shuenn Deng & Yi-Chen Lin, 2013. "Parameter heterogeneity in the foreign direct investment-income inequality relationship: a semiparametric regression analysis," Empirical Economics, Springer, vol. 45(2), pages 845-872, October.
  7. Teixeira, Aurora A.C. & Tavares-Lehmann, Ana Teresa, 2014. "Human capital intensity in technology-based firms located in Portugal: Does foreign ownership matter?," Research Policy, Elsevier, vol. 43(4), pages 737-748.

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