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Foreign Direct Investment and Economic Growth

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  • Guido Baldi
  • Jakob Miethe

Abstract

Various proposals are currently being suggested to encourage higher foreign direct investment in countries within the euro area, particularly between individual member states. The intended goal is to assist in stimulating economic growth in the euro area. Against this background, this article provides an overview of the large and heterogeneous academic literature on the influence of direct investment on economic growth. The results of the existing studies indicate that direct investment often acts as a kind of catalyst and that a positive influence on economic growth becomes more probable when a country has a population with a high level of education, high-quality infrastructure, or a developed financial system.

Suggested Citation

  • Guido Baldi & Jakob Miethe, 2015. "Foreign Direct Investment and Economic Growth," DIW Roundup: Politik im Fokus 71, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwrup:71en
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    File URL: https://www.diw.de/documents/publikationen/73/diw_01.c.510103.de/DIW_Roundup_71_en.pdf
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    References listed on IDEAS

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    3. Laura Alfaro & Areendam Chanda & Sebnem Kalemli-Ozcan & Selin Sayek, 2006. "How Does Foreign Direct Investment Promote Economic Growth? Exploring the Effects of Financial Markets on Linkages," NBER Working Papers 12522, National Bureau of Economic Research, Inc.
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    5. Jürgen Bitzer & Holger Görg, 2009. "Foreign Direct Investment, Competition and Industry Performance," The World Economy, Wiley Blackwell, vol. 32(2), pages 221-233, February.
    6. Gabriel Zucman, 2013. "The Missing Wealth of Nations: Are Europe and the U.S. net Debtors or net Creditors?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(3), pages 1321-1364.
    7. Silvio Contessi & Ariel Weinberger, 2009. "Foreign direct investment, productivity, and country growth: an overview," Review, Federal Reserve Bank of St. Louis, vol. 91(Mar), pages 61-78.
    8. Alfaro, Laura & Charlton, Andrew, 2007. "Growth and the quality of foreign direct investment: is all FDI equal?," LSE Research Online Documents on Economics 19666, London School of Economics and Political Science, LSE Library.
    9. Guido Baldi & Ferdinand Fichtner & Claus Michelsen & Malte Rieth, 2014. "Weak Investment Dampens Europe’s Growth," DIW Economic Bulletin, DIW Berlin, German Institute for Economic Research, vol. 4(7), pages 8-21.
    10. Laura Alfaro & Areendam Chanda & Sebnem Kalemli-Ozcan & Selin Sayek, 2006. "Foreign Direct Investment, Financial Markets and Economic," 2006 Meeting Papers 369, Society for Economic Dynamics.
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    Cited by:

    1. Guido Baldi & Andre Bodmer, 2018. "Intangible Capital Formation, International Equity Investments, and Output Synchronization," Diskussionsschriften dp1810, Universitaet Bern, Departement Volkswirtschaft.
    2. Markus Gerhard, 2018. "Mehr Schutz vor ausländischen Direktinvestitionen? [More stringent Foreign Direct Investment Control in the EU?]," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 98(11), pages 814-820, November.
    3. Takeo Hoshi, 2018. "Has Abenomics Succeeded in Raising Japan's Inward Foreign Direct Investment?," Asian Economic Policy Review, Japan Center for Economic Research, vol. 13(1), pages 149-168, January.
    4. Guido Baldi & Jakob Miethe, 2015. "Ausländische Direktinvestitionen und Wirtschaftswachstum," DIW Roundup: Politik im Fokus 71, DIW Berlin, German Institute for Economic Research.

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