IDEAS home Printed from https://ideas.repec.org/a/sae/ecdequ/v18y2004i3p255-268.html
   My bibliography  Save this article

The Effects of Foreign Capital on State Economic Growth

Author

Listed:
  • Megan A. Torau

    (Columbia University)

  • Ernest Goss

    (Creighton University)

Abstract

U.S. Bureau of Economic Analysis data show that the nation’s rate of yearly output growth between 1995 and 1999 was more than 50% higher than for the period 1987 to 1994. Using state-level data, this study examines foreign capital’s contribution to this upturn in growth. Pooling data for the 50 states in a regression framework showed that foreign capital accounted for 2.6% of overall state output growth for the full period. Foreign capital made no contribution between 1987 and 1994 but accounted for 3.7% of output growth between 1995 and 1999. Furthermore, estimates show that foreign capital had a much larger impact on the manufacturing sector, accounting for more than 16.7% of state manufacturing output growth between 1995 and 1999.

Suggested Citation

  • Megan A. Torau & Ernest Goss, 2004. "The Effects of Foreign Capital on State Economic Growth," Economic Development Quarterly, , vol. 18(3), pages 255-268, August.
    • Handle: RePEc:sae:ecdequ:v:18:y:2004:i:3:p:255-268
    DOI: 10.1177/0891242404265994
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/0891242404265994
    Download Restriction: no
    File URL: https://libkey.io/10.1177/0891242404265994?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. J Myles Shaver, 1998. "Do Foreign-Owned and U.S.-Owned Establishments Exhibit the Same Location Pattern in U.S. Manufacturing Industries?," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 29(3), pages 469-492, September.
    2. Meredith, Lindsay N. & Maki, Dennis R., 1992. "The United States export and foreign direct investment linkage in Canadian manufacturing industries," Journal of Business Research, Elsevier, vol. 24(1), pages 73-88, January.
    3. Rubiana Chamarbagwala & Sunder Ramaswamy & Phanindra Wunnava, 2000. "The role of foreign capital in domestic manufacturing productivity: empirical evidence from Asian economies," Applied Economics, Taylor & Francis Journals, vol. 32(4), pages 393-398.
    4. Hausman, Jerry A & Taylor, William E, 1981. "Panel Data and Unobservable Individual Effects," Econometrica, Econometric Society, vol. 49(6), pages 1377-1398, November.
    5. Edward M. Graham & Paul Krugman, 1995. "Foreign Direct Investment in the United States, 3rd Edition," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 52, October.
    6. Swenson, Deborah L., 1994. "The impact of U.S. tax reform on foreign direct investment in the United States," Journal of Public Economics, Elsevier, vol. 54(2), pages 243-266, June.
    7. Ernest P. Goss & Joseph M. Phillips, 2001. "The Impact of Tax Incentives: Do Initial Economic Conditions Matter?," Growth and Change, Wiley Blackwell, vol. 32(2), pages 236-250.
    8. Coughlin, Cletus C & Terza, Joseph V & Arromdee, Vachira, 1991. "State Characteristics and the Location of Foreign Direct Investment within the United States," The Review of Economics and Statistics, MIT Press, vol. 73(4), pages 675-683, November.
    9. Terry F. Buss, 2001. "The Effect of State Tax Incentives on Economic Growth and Firm Location Decisions: An Overview of the Literature," Economic Development Quarterly, , vol. 15(1), pages 90-105, February.
    10. Hines, James R, Jr, 1996. "Altered States: Taxes and the Location of Foreign Direct Investment in America," American Economic Review, American Economic Association, vol. 86(5), pages 1076-1094, December.
    11. Leah M. Cook & Alicia H. Munnell, 1990. "How does public infrastructure affect regional economic performance?," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 11-33.
    12. Weitzman, Martin L., 1979. "Technology transfer to the USSR: An econometric analysis," Journal of Comparative Economics, Elsevier, vol. 3(2), pages 167-177, June.
    13. Jeffrey S Arpan & Edward B Flowers & David A Ricks, 1981. "Foreign Direct Investment in the United States: The State of Knowledge in Research," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 12(1), pages 137-154, March.
    14. Peter S. Fisher & Alan H. Peters, 1998. "Industrial Incentives: Competition among American Cities and States," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number ii, August.
    15. Peter Pedroni, 2001. "Purchasing Power Parity Tests In Cointegrated Panels," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 727-731, November.
    16. Balcao Reis, Ana, 2001. "On the welfare effects of foreign investment," Journal of International Economics, Elsevier, vol. 54(2), pages 411-427, August.
    17. Crain, W Mark & Lee, Katherine J, 1999. "Economic Growth Regressions for the American States: A Sensitivity Analysis," Economic Inquiry, Western Economic Association International, vol. 37(2), pages 242-257, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Elias Ajaga & Peter Nunnenkamp, 2008. "Inward FDI, Value Added and Employment in US States: A Panel Cointegration Approach," Aussenwirtschaft, University of St. Gallen, School of Economics and Political Science, Swiss Institute for International Economics and Applied Economics Research, vol. 63(04), pages 347-367, December.
    2. Eckhardt Bode & Peter Nunnenkamp, 2011. "Does foreign direct investment promote regional development in developed countries? A Markov chain approach for US states," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 147(2), pages 351-383, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Goss, Ernie & Wingender Jr., John R. & Torau, Megan, 2007. "The contribution of foreign capital to U.S. productivity growth," The Quarterly Review of Economics and Finance, Elsevier, vol. 47(3), pages 383-396, July.
    2. Eckhardt Bode & Peter Nunnenkamp, 2011. "Does foreign direct investment promote regional development in developed countries? A Markov chain approach for US states," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 147(2), pages 351-383, June.
    3. Carlianne Patrick, 2014. "The economic development incentives game: an imperfect information, heterogeneous communities approach," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 53(1), pages 137-156, August.
    4. McPhail, Joseph E. & Orazem, Peter & Singh, Rajesh, 2010. "The Poverty of States: Do State Tax Policies Affect State Labor Productivity?," Staff General Research Papers Archive 31552, Iowa State University, Department of Economics.
    5. Jirjahn, Uwe, 2024. "Corporate Globalization and Worker Representation," IZA Discussion Papers 16727, Institute of Labor Economics (IZA).
    6. Michael Wasylenko, 1997. "Taxation and economic development: the state of the economic literature," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 37-52.
    7. Doeringer, Peter & Evans-Klock, Christine & Terkla, David, 2004. "What attracts high performance factories? Management culture and regional advantage," Regional Science and Urban Economics, Elsevier, vol. 34(5), pages 591-618, September.
    8. Peter Egger & Simon Loretz & Michael Pfaffermayr & Hannes Winner, 2006. "Corporate Taxation and Multinational Activity," CESifo Working Paper Series 1773, CESifo.
    9. Bruce Blonigen, 2005. "A Review of the Empirical Literature on FDI Determinants," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 33(4), pages 383-403, December.
    10. G. Jason Jolley & Mandee Foushee Lancaster & Jiang Gao, 2015. "Tax Incentives and Business Climate," Economic Development Quarterly, , vol. 29(2), pages 180-186, May.
    11. Svetlana Raudonen & Andreas Freytag, 2012. "Determinants of FDI inflows into the Baltic countries: Empirical evidence from a gravity model," Jena Economics Research Papers 2012-060, Friedrich-Schiller-University Jena.
    12. Agnès Bénassy-Quéré & Lionel Fontagné & Amina Lahrèche-Revil, 2000. "Foreign Direct Investment and the Prospects for Tax Co-Ordination in Europe," Working Papers 2000-06, CEPII research center.
    13. Gordon, Roger H. & Hines, James Jr, 2002. "International taxation," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 28, pages 1935-1995, Elsevier.
    14. Zhiyong An, 2012. "Taxation and foreign direct investment (FDI): empirical evidence from a quasi-experiment in China," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(5), pages 660-676, October.
    15. Michael I. Luger & Suho Bae, 2005. "The Effectiveness of State Business Tax Incentive Programs: The Case of North Carolina," Economic Development Quarterly, , vol. 19(4), pages 327-345, November.
    16. Ulgado, Francis M. & Lee, Moonkyu, 2004. "The effects of nationality differences on manufacturing location in the US: a conjoint analysis approach," International Business Review, Elsevier, vol. 13(4), pages 503-522, August.
    17. Elias Ajaga & Peter Nunnenkamp, 2008. "Inward FDI, Value Added and Employment in US States: A Panel Cointegration Approach," Aussenwirtschaft, University of St. Gallen, School of Economics and Political Science, Swiss Institute for International Economics and Applied Economics Research, vol. 63(04), pages 347-367, December.
    18. Michael J. Hicks, 2006. "Transportation and infrastructure, retail clustering, and local public finance: evidence from Wal-Mart's expansion," Regional Economic Development, Federal Reserve Bank of St. Louis, issue Oct, pages 100-114.
    19. Devereux, Michael P. & Griffith, Rachel, 1998. "Taxes and the location of production: evidence from a panel of US multinationals," Journal of Public Economics, Elsevier, vol. 68(3), pages 335-367, June.
    20. BADALYAN, Gohar & HERZFELD, Thomas & RAJCANIOVA, Miroslava, 2014. "Transport Infrastructure And Economic Growth: Panel Data Approach For Armenia, Georgia And Turkey," Review of Agricultural and Applied Economics (RAAE), Faculty of Economics and Management, Slovak Agricultural University in Nitra, vol. 17(2), pages 1-10, October.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:ecdequ:v:18:y:2004:i:3:p:255-268. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.