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Manufacturing FDI and economic growth: evidence from Asian economies

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  • Miao Wang

Abstract

Previous empirical studies on inward foreign direct investment (FDI) and economic growth generate mixed results. This article suggests that the ambiguous results might be caused by the use of total FDI. We study the heterogeneous effects of different sector-level FDI inflows on host country's economic growth. Data from 12 Asian economies over the period of 1987 to 1997 are employed. Strong evidence shows that FDI in manufacturing sector has a significant and positive effect on economic growth in the host economies. FDI inflows in nonmanufacturing sectors do not play a significant role in enhancing economic growth. Furthermore, without the decomposition of total FDI inflows, the effect of manufacturing FDI on host country's economic growth is understated by at least 48%.

Suggested Citation

  • Miao Wang, 2009. "Manufacturing FDI and economic growth: evidence from Asian economies," Applied Economics, Taylor & Francis Journals, vol. 41(8), pages 991-1002.
  • Handle: RePEc:taf:applec:v:41:y:2009:i:8:p:991-1002 DOI: 10.1080/00036840601019059
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    Cited by:

    1. Mahmoud Arayssi & Ali Fakih, 2015. "Institutions and development in MENA region: evidence from the manufacturing sector," International Journal of Social Economics, Emerald Group Publishing, vol. 42(8), pages 717-732, August.
    2. Peiming Wang & Joseph Alba & Donghyun Park, 2013. "Determinants of Different Modes of FDI: Firm-Level Evidence from Japanese FDI into the US," Open Economies Review, Springer, vol. 24(3), pages 425-446, July.
    3. Vasile Alecsandru STRAT, 2015. "The relationship between the education system and the inflows of FDI for the Central and East European EU new member states," Romanian Journal of Economics, Institute of National Economy, vol. 41(2(50)), pages 76-92, december.
    4. Sharif M. Hossain & Nobuhiro Hosoe, 2017. "Foreign Direct Investment in the Ready-Made Garments Sector of Bangladesh : Macro and Distributional Implications," GRIPS Discussion Papers 17-10, National Graduate Institute for Policy Studies.
    5. Nevine Mokhtar Eid, 2008. "Financial Development: A Pre-Condition for Foreign Direct Spillover Effects in Egypt," Working Papers 12, The German University in Cairo, Faculty of Management Technology.
    6. Larisa Kapustina & Ľudmila Lipková & Oksana Falchenko, 2016. "Evaluation of Foreign Direct Investment Contribution in the Economic Development of Sverdlovsk Region and Russia," Economy of region, Centre for Economic Security, Institute of Economics of Ural Branch of Russian Academy of Sciences, vol. 1(3), pages 741-754.
    7. repec:rjr:romjef:v::y:2017:i:2:p:29-44 is not listed on IDEAS
    8. J. Rosell-Martinez & P. Sanchez-Sellero, 2012. "Foreign direct investment and technical progress in Spanish manufacturing," Applied Economics, Taylor & Francis Journals, vol. 44(19), pages 2473-2489, July.
    9. repec:eee:inteco:v:150:y:2017:i:c:p:57-71 is not listed on IDEAS
    10. Rudra Prakash Pradhan, 2010. "Financial Deepening, Foreign Direct Investment and Economic Growth: Are They Cointegrated," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 1(1), pages 37-43, December.
    11. Gulam Hassan, Mohamed Aslam & Abou Sakar, Sameer, 2013. "Foreign Direct Investment, Human Capital and Economic Growth in Malaysia," MPRA Paper 51930, University Library of Munich, Germany.
    12. Basem Elmukhtar Ertimi & Abulkasem Dowa & Elham Mohamed Albisht & Basim Aboubaker Oqab, 2016. "The Impact of Corruption on Economic Growth in OIC Countries," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(9), pages 91-103, September.
    13. Metaxas, Theodore & Kechagia, Polyxeni, 2015. "FDI in Peru and Uzbekistan: A comparative analysis in brief," MPRA Paper 63849, University Library of Munich, Germany.
    14. Mite Miteski & Dijana Janevska Stefanova, 2017. "The Impact of Sectorial FDI on Economic Growth in Central, Eastern and Southeastern Europe," Working Papers 2017-01, National Bank of the Republic of Macedonia.
    15. Clark Don P. & Highfill Jannett & de Oliveira Campino Jonas & Rehman Scheherazade S., 2011. "FDI, Technology Spillovers, Growth, and Income Inequality: A Selective Survey," Global Economy Journal, De Gruyter, vol. 11(2), pages 1-44, July.
    16. Dinh Hong Linh & Shih-Mo Lin, 2014. "CO2 Emissions, Energy Consumption, Economic Growth and FDI in Vietnam," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 12(3 (Fall)), pages 219-232.
    17. Jeffrey A. Edwards & Alfredo A. Romero & Zagros Madjd-Sadjadi, 2016. "Foreign direct investment, economic growth, and volatility: a useful model for policymakers," Empirical Economics, Springer, vol. 51(2), pages 681-705, September.
    18. repec:eaa:aeinde:v:17:y:2017:i:1_2 is not listed on IDEAS
    19. Shima'a Hanafy, 2015. "Sectoral FDI and Economic Growth — Evidence from Egyptian Governorates," MAGKS Papers on Economics 201537, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    20. Thomas Brenner & Daniel Lee, 2014. "Weather Conditions and Economic Growth - Is Productivity Hampered by Climate Change?," Working Papers on Innovation and Space 2014-06, Philipps University Marburg, Department of Geography.
    21. Temiz, Dilek & Gökmen, Aytaç, 2014. "FDI inflow as an international business operation by MNCs and economic growth: An empirical study on Turkey," International Business Review, Elsevier, vol. 23(1), pages 145-154.
    22. Nevine Eid, "undated". "FDI-Growth Relationship: Is Financial Deepening a Pre-condition," EcoMod2006 272100023, EcoMod.
    23. Arfan Shahzad & Abdullah Kaid Al-Swidi & Dawood Ali Mithani & Faudziah Hanim Bt Fadzil & Abd Ghani Bin Golamuddin, 2012. "An Empirical Investigation on The Effect of Business Environment Factors on The FDI Inflows in Pakistan: The Moderating Role of Political Stability," Business and Economic Research, Macrothink Institute, vol. 2(2), pages 156-170, December.

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