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

Listed author(s):
  • Nury Effendi

    (Department of Economics, Padjadjaran University)

  • Femmy Soemantri

    ()

    (Department of Economics, Padjadjaran University)

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.

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File URL: http://ceds.feb.unpad.ac.id/wopeds/200305.pdf
File Function: First version, 2003
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Paper provided by Department of Economics, Padjadjaran University in its series Working Papers in Economics and Development Studies (WoPEDS) with number 200305.

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Length: 14 pages
Date of creation: Jul 2003
Date of revision: Jul 2003
Handle: RePEc:unp:wpaper:200305
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  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.
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