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Foreign Direct Investment And Regional Economic Growth In Indonesia: A Panel Data Study

Author

Listed:
  • Nury Effendi

    (Department of Economics, Padjadjaran University)

  • Femmy Soemantri

    () (Department of Economics, Padjadjaran University)

Abstract

The main objective of this study is to determine the effects of foreign direct investment on economic growth of twenty-six provinces in Indonesia during 1987-2000 using panel data analysis. Quantitative and qualitative analysis were used in this research. Qualitative analysis describes the foreign direct investment in Indonesia. Panel data analysis with fixed effect method was used as a quantitative analysis to capture the main objective of this research. The results of this study are : (1) Foreign Direct Investment in Indonesia is positively correlated with the economic growth, although it is not statistically significant; (2) The factors that promote foreign direct investment in Indonesia are domestic investment; private consumption, export, import, and education; (3) There is a complementary relationship between foreign direct investment and domestic investment; (4) The quality of human resources gives a strong effect on economic growth and foreign direct investment.

Suggested Citation

  • Nury Effendi & Femmy Soemantri, 2003. "Foreign Direct Investment And Regional Economic Growth In Indonesia: A Panel Data Study," Working Papers in Economics and Development Studies (WoPEDS) 200305, Department of Economics, Padjadjaran University, revised Jul 2003.
  • Handle: RePEc:unp:wpaper:200305
    as

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    File URL: http://ceds.feb.unpad.ac.id/wopeds/200305.pdf
    File Function: First version, 2003
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    References listed on IDEAS

    as
    1. V N Balasubramanyam & D Sapsford & M A Salisu, "undated". "Foreign Direct Investment and Growth," Working Papers ec13/94, Department of Economics, University of Lancaster.
    2. Alfaro, Laura & Chanda, Areendam & Kalemli-Ozcan, Sebnem & Sayek, Selin, 2004. "FDI and economic growth: the role of local financial markets," Journal of International Economics, Elsevier, vol. 64(1), pages 89-112, October.
    3. 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.
    4. Dutt, Amitava Krishna, 1997. "The pattern of direct foreign investment and economic growth," World Development, Elsevier, vol. 25(11), pages 1925-1936, November.
    5. Haddad, Mona & Harrison, Ann, 1993. "Are there positive spillovers from direct foreign investment? : Evidence from panel data for Morocco," Journal of Development Economics, Elsevier, vol. 42(1), pages 51-74, October.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Foreign Direce Investment; growth; Indonesia;

    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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