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Outward FDI and economic growth

  • Dierk Herzer

Purpose – The purpose of this paper is to examine the impact of outward foreign direct investment (FDI) on economic growth. Design/methodology/approach – Two econometric approaches are used: cross-country regressions for a sample of 50 countries and time-series estimators for the USA. Findings – Both approaches tell the same story: outward FDI is positively associated with growth. This finding is robust to several model specifications, potential outliers, and different estimation techniques. In addition, Granger-causality tests for the USA indicate that causality is bidirectional, suggesting that increased outward FDI is both a cause and a consequence of increased domestic output. Originality/value – Previous studies have primarily examined the firm- and industry-level effects of outward FDI – for example, on domestic investment, employment, and productivity. This paper, in contrast, deals with the effects of aggregate outward FDI on the economy as a whole.

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Article provided by Emerald Group Publishing in its journal Journal of Economic Studies.

Volume (Year): 37 (2010)
Issue (Month): 5 (September)
Pages: 476-494

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Handle: RePEc:eme:jespps:v:37:y:2010:i:5:p:476-494
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