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Productivity Growth And Technological Diffusion Through Foreign Direct Investment

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  • JAEJOON WOO

Abstract

Foreign direct investment (FDI) has dramatically increased worldwide and is the most important form of all private capital flows to developing countries. Yet, it is an important empirical question whether FDI affects total factor productivity (TFP) positively. We investigate the effect of FDI on TFP growth in a large sample of countries in 1970–2000. Our econometric results indicate that FDI has a positive and direct effect on TFP growth. However, we do not find any evidence that the impact of FDI on TFP growth is only conditional on the recipient country’s capability to absorb foreign technology. We carefully address the robustness of the empirical results. (JEL O11, O40, O47, F21)

Suggested Citation

  • Jaejoon Woo, 2009. "Productivity Growth And Technological Diffusion Through Foreign Direct Investment," Economic Inquiry, Western Economic Association International, vol. 47(2), pages 226-248, April.
    • Handle: RePEc:bla:ecinqu:v:47:y:2009:i:2:p:226-248
    DOI: 10.1111/j.1465-7295.2008.00166.x
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    More about this item

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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