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The Effects of Foreign Direct Investment And Imports on Economic Growth: A Comparative Analysis of Thailand and the Philippines (1970-1998)

Author

Listed:
  • Jamshid Damooei.
  • Tavakoli, Akbar.

    (Claifornia Lutheran University, USA
    Isfahan University of Technology, Iran)

Abstract

The main objective of this paper is to estimate the output elasticity of foreign direct investment (FDI) and imports in Thailand and in the Philippines during the period 1970ñ1998. Applying a CES generalization of Cobb-Douglas production function, the output response to FDI is the same in both countries, but imports affect Thailand more than the Philippines. The FDI contribution to every one percentage growth point is about 0.05 of a percentage point in each country where imports contribute about 0.47 of a percentage point in Thailand and 0.31 of a percentage point in the Philippines. As a result, the foreign investment and imports contribute about 52 percent of every one percentage growth point in Thailand compared to a lower 36 percent in the Philippines. The remaining effects on the economic growth are from labor and domestic investment. Both countries are labor intensive, but the impact of labor is more significant in the Philippines. The Philippine economy is also more domestic capital intensive than the Thai economy. Furthermore, the FDI path shows that the effect of foreign investment is more pronounced in the Philippines during the second half of the 1990s, whereas the imports are more effective in Thailand since 1994. Therefore, the Philippine economy could gain more from directing its economic policies to further liberalize its foreign investments. The Thai economy, on the other hand, should continue its reliance on imported foreign technology in order to accelerate its economic growth.

Suggested Citation

  • Jamshid Damooei. & Tavakoli, Akbar., 2006. "The Effects of Foreign Direct Investment And Imports on Economic Growth: A Comparative Analysis of Thailand and the Philippines (1970-1998)," Journal of Developing Areas, Tennessee State University, College of Business, vol. 39(2), pages 79-100, January-M.
    • Handle: RePEc:jda:journl:vol.39:year:2006:issue2:pp:79-100
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    Citations

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    Cited by:

    1. Mohammad Mafizur Rahman & Muhammad Shahbaz, 2013. "Do Imports and Foreign Capital Inflows Lead Economic Growth? Cointegration and Causality Analysis in Pakistan," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 14(1), pages 59-81, March.
    2. Thi Thuy Hang Le & Van Chien Nguyen & Thi Hang Nga Phan, 2022. "Foreign Direct Investment, Environmental Pollution and Economic Growth—An Insight from Non-Linear ARDL Co-Integration Approach," Sustainability, MDPI, vol. 14(13), pages 1-14, July.
    3. Rahman, Mohammad Mafizur & Mamun, Shamsul Arifeen Khan, 2016. "Energy use, international trade and economic growth nexus in Australia: New evidence from an extended growth model," Renewable and Sustainable Energy Reviews, Elsevier, vol. 64(C), pages 806-816.
    4. Muhammad, Shahbaz & Mohammad, Mafizur Rahman & Abdul, Farooq, 2012. "Financial Development, International Trade and Economic Growth in Australia:New Evidence from Multivariate Framework Analysis," MPRA Paper 42023, University Library of Munich, Germany, revised 17 Oct 2012.
    5. Muhammad Shahbaz & Mohammad Mafizur Rahman, 2012. "The Dynamic of Financial Development, Imports, Foreign Direct Investment and Economic Growth: Cointegration and Causality Analysis in Pakistan," Global Business Review, International Management Institute, vol. 13(2), pages 201-219, June.
    6. Hezron M. Osano & Pauline W. Koine, 2016. "Role of foreign direct investment on technology transfer and economic growth in Kenya: a case of the energy sector," Journal of Innovation and Entrepreneurship, Springer, vol. 5(1), pages 1-25, December.
    7. Amadou Maiga Ousseini & Hu Xiaojuan & Metuge Mekongcho Terence & Kigbadjah Coulibaly Salifou, 2018. "Effects of Economic Globalization, Foreign Capital Influx on Export in ECOWAS," Global Economy Journal, De Gruyter, vol. 18(4), pages 1-16, December.
    8. Olufemi Saibu, 2014. "Capital Inflow and Economic Growth Nexus in Nigeria: The Role of Trade Openness," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 6(6), pages 99-113, December.
    9. SBIA, Rashid & Al Rousan, Sahel, 2015. "Does Financial Development Induce Economic Growth in UAE? The Role of Foreign Direct Investment and Capitalization," MPRA Paper 64599, University Library of Munich, Germany.

    More about this item

    Keywords

    Foreign Direct Investment; Imports; Economic Growth;
    All these keywords.

    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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