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Good or Bad? The Influence of FDI on Output Growth: An industry-level analysis

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  • Carmen F. Castejón
  • Julia Wörz

Abstract

This paper attempts to reconcile the often inconclusive evidence on the impact of FDI on growth by taking into account the heterogeneity both among industries and among countries. Using a comparable database at the industry level for 35 countries of the OECD, Asia and Eastern Europe from 1987 to 2002, we test both the stage of development and the FDI industrial pattern for the economic impact of FDI on growth. In certain industries and for the catching-up countries, a significant and positive relationship emerges when FDI interacts with investment or export orientation.

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Bibliographic Info

Paper provided by The Vienna Institute for International Economic Studies, wiiw in its series wiiw Working Papers with number 38.

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Date of creation: Apr 2006
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Publication status: Published as wiiw Working Paper
Handle: RePEc:wii:wpaper:38

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Keywords: FDI; heterogeneity; manufacturing sector; panel data analysis;

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References

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  1. James R. Markusen & Thomas F. Rutherford, 2004. "Learning on the Quick and Cheap: Gains from Trade Through Imported Expertise," NBER Working Papers 10603, National Bureau of Economic Research, Inc.
  2. Blomström, Magnus & Lipsey, Robert E & Zejan, Mario, 1993. "Is Fixed Investment the Key to Economic Growth?," CEPR Discussion Papers 870, C.E.P.R. Discussion Papers.
  3. Balázs, Muraközy & Halpern, László, 2005. "Does Distance Matter in Spillover?," CEPR Discussion Papers 4857, C.E.P.R. Discussion Papers.
  4. Nair-Reichert, Usha & Weinhold, Diana, 2001. " Causality Tests for Cross-Country Panels: A New Look at FDI and Economic Growth in Developing Countries," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(2), pages 153-71, May.
  5. Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998. "How does foreign direct investment affect economic growth?1," Journal of International Economics, Elsevier, vol. 45(1), pages 115-135, June.
  6. Rodriguez-Clare, Andres, 1996. "Multinationals, Linkages, and Economic Development," American Economic Review, American Economic Association, vol. 86(4), pages 852-73, September.
  7. Theodore H. Moran & Edward M. Graham & Magnus Blomstrom, 2005. "Does Foreign Direct Investment Promote Development?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 3810.
  8. Akinlo, A. Enisan, 2004. "Foreign direct investment and growth in Nigeria: An empirical investigation," Journal of Policy Modeling, Elsevier, vol. 26(5), pages 627-639, July.
  9. Christian Bellak, 2004. "How Domestic and Foreign Firms Differ and Why Does it Matter?," Journal of Economic Surveys, Wiley Blackwell, vol. 18(4), pages 483-514, 09.
  10. Timmer, Marcel P., 2003. "Technological development and rates of return to investment in a catching-up economy: the case of South Korea," Structural Change and Economic Dynamics, Elsevier, vol. 14(4), pages 405-425, December.
  11. John H Dunning, 1988. "The Eclectic Paradigm of International Production: A Restatement and Some Possible Extensions," Journal of International Business Studies, Palgrave Macmillan, vol. 19(1), pages 1-31, March.
  12. Bruno Van Pottelsberghe De La Potterie & Frank Lichtenberg, 2001. "Does Foreign Direct Investment Transfer Technology Across Borders?," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 490-497, August.
  13. L.R. de Mello Jr., 1996. "Foreign Direct Investment-Led Growth: Evidence from Time Series and Panel Data," Studies in Economics 9615, Department of Economics, University of Kent.
  14. Bruce A. Blonigen & Miao Wang, 2004. "Inappropriate Pooling of Wealthy and Poor Countries in Empirical FDI Studies," NBER Working Papers 10378, National Bureau of Economic Research, Inc.
  15. M. Ishaq Nadiri, 1993. "Innovations and Technological Spillovers," NBER Working Papers 4423, National Bureau of Economic Research, Inc.
  16. Magnus Blomstrom & Robert E. Lipsey & Mario Zejan, 1992. "What Explains Developing Country Growth?," NBER Working Papers 4132, National Bureau of Economic Research, Inc.
  17. Kiviet, Jan F., 1995. "On bias, inconsistency, and efficiency of various estimators in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 68(1), pages 53-78, July.
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Citations

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Cited by:
  1. Özlem Onaran & Engelbert Stockhammer, 2006. "The effect of FDI and foreign trade on wages in the Central and Eastern European Countries in the post-transition era: A sectoral analysis," Department of Economics Working Papers wuwp094, Vienna University of Economics, Department of Economics.
  2. Joaquín Andaluz, 2008. "Vertical product differentiation with subcontracting," Documentos de Trabajo dt2008-01, Facultad de Ciencias Económicas y Empresariales, Universidad de Zaragoza.
  3. Hugo Rojas-Romagosa, 2006. "Productivity Effects of FDI Inflows: A Literature Review," CPB Memorandum 170, CPB Netherlands Bureau for Economic Policy Analysis.
  4. Patricia Bachiller & María José Arcas, 2006. "Performance and capital structure of privatized firms in the european union," Documentos de Trabajo dt2006-02, Facultad de Ciencias Económicas y Empresariales, Universidad de Zaragoza.
  5. Łukasz Goczek, 2011. "International Openness and Social Development as Endogenous Determinants of Growth," Working Papers 2011-22, Faculty of Economic Sciences, University of Warsaw.
  6. Özlem Onaran, 2006. "Speculation-led growth and fragility in Turkey: Does EU make a difference or "can it happen again"?," Department of Economics Working Papers wuwp093, Vienna University of Economics, Department of Economics.

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