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Foreign direct investment, capital accumulation, and growth: The rise of the Emerging South

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  • Demir, Firat
  • Lee, Sunhyung

Abstract

Using a unique dataset on bilateral FDI flows between 1990 and 2012, we analyze the heterogeneous growth effects of FDI originating from the North, the Emerging South, and the South in each country group. After controlling for the aggregation bias, sample selection bias, country heterogeneity, and endogeneity issues, and using various estimation techniques and robustness tests, we detect no long-run effects of FDI on the host country per capita GDP growth, independent of its direction. However, we find a significantly positive effect on long-run levels of GDP per capita in the sub-country groups of North–North, Emerging-North, and South-Emerging. The effects are stronger for countries with similar institutional development levels.

Suggested Citation

  • Demir, Firat & Lee, Sunhyung, 2022. "Foreign direct investment, capital accumulation, and growth: The rise of the Emerging South," International Review of Economics & Finance, Elsevier, vol. 80(C), pages 779-794.
    • Handle: RePEc:eee:reveco:v:80:y:2022:i:c:p:779-794
    DOI: 10.1016/j.iref.2022.02.044
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    More about this item

    Keywords

    Foreign direct investment; Economic growth; North–South heterogeneity; Capital accumulation;
    All these keywords.

    JEL classification:

    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • P33 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid

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