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Foreign direct investment, trade and economic development: An overview

Author

Listed:
  • Blanga-Gubbay, Michael
  • Rubínová, Stela

Abstract

This paper explores the dynamic relationships between foreign direct investment (FDI), international trade, and economic development. First, emphasizing the pivotal role of multinational enterprises (MNEs) - particularly in the context of Global Value Chains (GVCs) - it underscores how FDI and trade are mutually reinforcing. Then, it highlights the convergence of investment and trade policies, pointing out the impact of Bilateral Investment Treaties (BITs) on trade flows and the increasing inclusion of investment provisions in Regional Trade Agreements (RTAs). Third, examining global FDI trends, it shows that developing and emerging economies are still lagging behind, but they are fast growing in importance. Finally, it draws on a rich empirical literature to show how FDI drives economic development through knowledge spillovers, technology transfer, and export upgrading.

Suggested Citation

  • Blanga-Gubbay, Michael & Rubínová, Stela, 2023. "Foreign direct investment, trade and economic development: An overview," WTO Staff Working Papers ERSD-2023-11, World Trade Organization (WTO), Economic Research and Statistics Division.
    • Handle: RePEc:zbw:wtowps:280986
    as

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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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