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Foreign Direct Investment-Led Growth: Evidence from Time Series and Panel Data

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  • L.R. de Mello Jr.

Abstract

This paper develops an endogenous growth model with foreign direct investment (FDI) and examines the impact of the latter on capital accumulation, output and total factor productivity (TFP) growth in the recipient economy. Time series and panel data evidence are provided for a sample of OECD and non OECD countries in teh 1970-90 period. Although FDI is expected to boost long-run growth in the recipient economy via technological transfers and knowlege spillovers, it is shown that the extent to which FDI is growth-enhancing depends on the degreee of complementarity and substitution between FDI and domestic investment. Also, FDI is shown to be more growth-enhancing in technological followers than leaders and sensitive to unobservable country-specific effects.

Suggested Citation

  • L.R. de Mello Jr., 1996. "Foreign Direct Investment-Led Growth: Evidence from Time Series and Panel Data," Studies in Economics 9615, School of Economics, University of Kent.
    • Handle: RePEc:ukc:ukcedp:9615
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    Keywords

    FDI; Endogenous Growth; Panel Data;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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