FDI and Growth: What Cross‐country Industry Data Say

Abstract

The theoretical literature has discussed different channels through which foreign direct investments (FDI) promote host country’s economic growth, but empirical analyses have so far been rather inconclusive. In this paper, exploiting the information of a disaggregated data set on a panel of 14 manufacturing sectors for (a sample of) developed and developing countries over the period 1992–2004, we are able to provide robust evidence on the positive and statistically significant growth effect of FDI in recipient countries. Moreover, we find that this effect is stronger in capital‐intensive and technologically advanced sectors. The growth enhancing effect comes primarily from an increase in total factor productivity (TFP) and from factors accumulation. Our results are robust to the inclusion of other determinants of economic growth and to controlling for potential endogeneity.

Does foreign direct investment expand the capability set in the host economy? A sectoral analysis

“…Hence, since the set of capabilities expands cumulatively, stock data are more appropriate to measure the foreign impact on the local economy (Zhu & Jeon, 2007). Lastly, Nunnenkamp and Spatz (2004) point out that potential endogeneity biases are less likely for the stock than for the flow variable because foreign investment inflows are much more dependent on the present economic conditions in the host economy (see also Cipollina et al, 2012). 6 Nevertheless, we also estimate the model with FDI flows instead of stocks.…”

Tourism foreign direct investment led tourism gross value added: a co-integration and causality analysis of Croatian tourism

“…Numerous recent studies have proven the different impacts of F.D.I. on the productivity of each sector (Alfaro, 2003;Cipollina, Giovannetti, Pietrovito, & Pozzolo, 2012;Tondl & Fornero, 2010).…”

United Arab EmiratesFDIOutlook

“…13 Detailed corporate-level data on the largest M&As by inward investing firms for the period 2008-10 show more than half took place in the services sector, in particular in finance as well as in 11 This perhaps explains why the UAE Government undertook business reforms making it easier to obtain construction permits, as mentioned below in the discussion of the policy scene. 12 A number of studies have looked into positive spillover effects of foreign investments on domestic firms using firm and plant level data (Cipollina et al, 2012). Some studies have found no spillovers (Aitken and Harrison, 1999) and weak evidence of positive horizontal externalities (Alfaro and Rodriguez-Clare, 2004), while other firm and plant-level studies have found strong evidence of knowledge spillovers (Branstetter, 2006;Haskel et al, 2006;and Keller and Yeaple, 2009 (Table 6).…”

“…9 A number of studies have found positive effect of FDI on growth in different countries. Cipollina et al (2012) cite studies which find positive effect of FDI on growth using sector data: Caves (1974) for Australia, Globerman (1979) for Canada, Bl€ omstrom and Persson (1983), Bl€ omstrom and Wolff (1994) for Mexico, Sj€ oholm (1999) for Indonesia, Haskel et al (2006) for the UK and Keller and Yeaple (2009) for the US. the share of real estate in the stock of FDI was the most volatile among the different sectors.…”