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Foreign direct investment and income convergence

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  • Changkyu Choi

Abstract

The role of foreign direct investment (FDI) in the convergence of income level and growth has been investigated by panel data regressions. Bilateral FDI data from OECD from 1982 to 1997 is used. Income level and growth gaps between source and host countries turn out to decrease as bilateral FDI increases. It is also found that geographical closeness and common language play an important role in convergence in income level and growth.

Suggested Citation

  • Changkyu Choi, 2004. "Foreign direct investment and income convergence," Applied Economics, Taylor & Francis Journals, vol. 36(10), pages 1045-1049.
  • Handle: RePEc:taf:applec:v:36:y:2004:i:10:p:1045-1049
    DOI: 10.1080/0003684042000246759
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    References listed on IDEAS

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    Cited by:

    1. Miao Wang, 2010. "Foreign direct investment and domestic investment in the host country: evidence from panel study," Applied Economics, Taylor & Francis Journals, vol. 42(29), pages 3711-3721.
    2. Marouane ALAYA (GREThA-GRES) & Dalila NICET-CHENAF (GREThA-GRES) & Eric ROUGIER (GREThA-GRES), 2007. "FDI Promotion policies and dynamic of growth in the South East Mediterranean countries (In French)," Cahiers du GRES (2002-2009) 2007-13, Groupement de Recherches Economiques et Sociales.
    3. Parikshit Basu & John Hicks & Richard Sappey, 2006. "Free Trade Agreements and Investment: A Chinese Perspective," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 13(2), pages 179-192.
    4. J. Paul Dunne & Nicholas Masiyandima, 2017. "Bilateral FDI from South Africa and Income Convergence in SADC," African Development Review, African Development Bank, vol. 29(3), pages 403-415, September.
    5. Yao, Shujie & Wei, Kailei, 2007. "Economic growth in the presence of FDI: The perspective of newly industrialising economies," Journal of Comparative Economics, Elsevier, vol. 35(1), pages 211-234, March.
    6. Changkyu Choi, 2009. "Does Bilateral Trade Lead To Income Convergence? Panel Evidence," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 34(1), pages 71-79, June.
    7. Sallahuddin Hassan & Musa Murtala, 2016. "The Role of Domestic Private Investment in Promoting Per Capita Income Convergence amongst Association of Southeast Asian Nations-5 Economies," International Journal of Economics and Financial Issues, Econjournals, vol. 6(4), pages 1299-1303.
    8. Alaya MAROUANE (Université of Tunis) & Dalila NICET-CHENAF (GREThA UMR CNRS 5113) & Eric ROUGIER (GREThA UMR CNRS 5113), 2008. "The law of growth and attraction: an endogenous model of absorptive capacities, FDI and income for MENA countries," Cahiers du GREThA 2008-27, Groupe de Recherche en Economie Théorique et Appliquée.
    9. Zhang Jiansheng & Tan Wei, 2016. "Study on the green total factor productivity in main cities of China," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics, vol. 34(1), pages 215-234.
    10. Shujie Yao, 2006. "On economic growth, FDI and exports in China," Applied Economics, Taylor & Francis Journals, vol. 38(3), pages 339-351.
    11. Alexe, Ileana & Tatomir, Cristina F., 2011. "Does economic convergence with the European Union mean more FDI flows to an economy? Analysis on 5 Central and Eastern Europe countries," MPRA Paper 36139, University Library of Munich, Germany.
    12. Ji Kim, 2005. "Convergence hypothesis of regional income in Korea," Applied Economics Letters, Taylor & Francis Journals, vol. 12(7), pages 431-435.
    13. Lee, Hsiu-Yun & Lin, Kenneth S. & Tsui, Hsiao-Chien, 2009. "Home country effects of foreign direct investment: From a small economy to a large economy," Economic Modelling, Elsevier, vol. 26(5), pages 1121-1128, September.
    14. Mihaela Simionescu, 2016. "The relation between economic growth and foreign direct investment during the economic crisis in the European Union," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics, vol. 34(1), pages 187-213.
    15. Sumru Oz, 2014. "Diffusion of Technology and Convergence of Income among Countries," Koç University-TUSIAD Economic Research Forum Working Papers 1407, Koc University-TUSIAD Economic Research Forum.
    16. Jingmei Ma & Hongyu Jia, 2015. "The Role of Foreign Direct Investment on Income Convergence in China after Early 1990s from a Spatial Econometric Perspective," Review of Development Economics, Wiley Blackwell, vol. 19(4), pages 829-842, November.
    17. Xu, WeiGuo & Hu, DaiPing & Lei, AiZhong & Shen, HuiZhang, 2008. "FDI chaos and control in China," Research in International Business and Finance, Elsevier, vol. 22(1), pages 17-28, January.

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