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The Positive Causal Impact of Foreign Direct Investment on Productivity: A Not So Typical Relationship

  • Rodolphe Desbordes

    ()

    (Department of Economics, University of Strathclyde)

  • Vincenzo Verardi

    ()

    (University of Namur (CRED) and Université Libre de Bruxelles (ECARES and CKE).)

Previous research has argued that foreign direct investment (FDI) exerts a positive and causal impact on the productivity of the recipient countries. However, we find that there is little macroeconomic evidence that FDI fosters productivity growth in recipient countries, including in those with high absorptive capacity, once we use an instrumental variables (IV) estimator robust to outliers.

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Paper provided by University of Strathclyde Business School, Department of Economics in its series Working Papers with number 1106.

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Length: 46 pages
Date of creation: Mar 2011
Date of revision:
Handle: RePEc:str:wpaper:1106
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  1. Ann E. Harrison & Brian J. Aitken, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, vol. 89(3), pages 605-618, June.
  2. Eswar S. Prasad & Raghuram G. Rajan & Arvind Subramanian, 2007. "Foreign Capital and Economic Growth," NBER Working Papers 13619, National Bureau of Economic Research, Inc.
  3. Eswar S Prasad & Marco Terrones & Ayhan Kose, 2008. "Does Openness to International Financial Flows Raise Productivity Growth?," IMF Working Papers 08/242, International Monetary Fund.
  4. Ayhan Kose & Kenneth Rogoff & Eswar S Prasad & Shang-Jin Wei, 2003. "Effects of Financial Globalization on Developing Countries; Some Empirical Evidence," IMF Occasional Papers 220, International Monetary Fund.
  5. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
  6. Francesco Caselli & Gerardo Esquivel & Fernando Lefort, 1997. "Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics," Working Papers Central Bank of Chile 03, Central Bank of Chile.
  7. Jürgen Bitzer & Holger Görg, 2009. "Foreign Direct Investment, Competition and Industry Performance," The World Economy, Wiley Blackwell, vol. 32(2), pages 221-233, 02.
  8. Christophe Croux & Geert Dhaene & Dirk Hoorelbeke, 2003. "Robust Standard Errors for Robust Estimators," Working Papers Department of Economics ces0316, KU Leuven, Faculty of Economics and Business, Department of Economics.
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