FDI, Technology Spillovers, Growth, and Income Inequality: A Selective Survey

Abstract

The present paper, restricting its attention to the empirical economics literature, attempts to gauge current thinking on the question of whether FDI causes economic growth. Since technological spillovers are a key determinant of long run economic growth, the survey begins with the firm level evidence on technological spillovers of FDI on domestic firms. The macro FDI and growth literature is covered next. Finally, we examine the effect of FDI on income inequality and/or employment, skills, or jobs. In many contexts policies that exacerbate income inequality come under special scrutiny even if they are welfare enhancing. Our major finding is that FDI is generally associated with positive technological spillovers, economic growth, and increasing income inequality. For all three of these results, however, there are significant counter examples in the literature which must be respected.

Science, technology, innovation and IP in India: new directions and prospects

“…The wide-ranging review by Clark et al (2011) offers a number of explanations of why FDI may lead to technology spillovers and enhance economic growth. These include both the mobility of trained workers from MNEs into domestic firms and the opportunity for domestic firms to imitate the production, management and marketing techniques of foreign firms.…”

“…Clark et al set out a number of reasons why this inward FDI may then lead to increasing income inequality, which for some observers may count as a negative effect. Clark et al (2011) survey the evidence from the latest statistical studies that have used panel data on host country firms to explore the impact of increased FDI in terms of technology spillovers. They deal separately with evidence of horizontal spillovers between foreign and domestic firms operating in parallel within a market, and vertical spillovers between firms operating at different points in the supply chain.…”

Does Growth Attract FDI?

“…FDI can also generate positive externalities. There have been several meta-analyses and surveys of the FDI spillovers literature (e.g., Clark et al 2011;Havránek and Iršová 2011;Havránek and Iršová 2012;Meyer and Sinani 2009;Wooster and Diebel 2010). These studies establish that FDI is generally associated with positive spillovers, with stronger evidence of vertical spillovers and weaker evidence of horizontal spillovers (Havránek and Iršová 2011;Havránek and Iršová 2012).…”

Direct foreign investments as factor of economic growth: the general and special

“…В ряде работ выдвигается гипотеза о существовании позитивного внешнего эффекта от использования политики поощ-рения притока ПИИ странами − реципиентами иностранных инвестиций. Эффект является более значимым в ин-дустриально развитых странах, характеризующихся высокой долей высокотехнологичных секторов, улучшаю-щих возможности передачи новых технологий [2]. Диффузия приобретаемых технологий способствует более ши-рокому их использованию в процессе обмена идеями.…”

“…Эффекта ПИИ усиливает неравенство в доходах, несмотря на то, что привлечение капитала способствует росту благосостояния в стране. ПИИ позитивно коррелируются с внешним эффектом от передачи технологий [2].…”