The role of foreign capital in domestic manufacturing productivity: empirical evidence from Asian economies

Abstract

The paper empirically examines the relative contribution of foreign and domestic machinery and equipment on manufacturing productivity in seven Asian economies. A Cobb-Douglas production function is used to test whether foreign machinery is more productive than domestic machinery. The study is based on a pooled cross-sectional time-series model, including seven countries - Hong Kong, Singapore, South Korea, Malaysia, Indonesia, the Philippines and India - for the years 1975 to 1990. The results support the hypothesis that a country's stage of development, skill-level of its labour force, and the technology embodied in capital play a crucial role in determining the relative impact of foreign and domestic capital on manufacturing productivity.

Military Spending and Economic Growth in the Middle East Countries: Bootstrap Panel Causality Test

“…Next, the Cobb-Douglas production function is much simpler and easier (Binswanger 1974). Moreover, it is more suitable for a time-series model to use the Cobb-Douglas production (Chamarbagwala, Ramaswamy, and Wunnava 2000). Finally, the Cobb-Douglas function fits almost any observed data, without offering an alternative way to analyze macroeconomic data (Shaikh 1974).…”

Economic and Political Determinants of the Effects of FDI on Growth in Transition and Developing Countries

“…Studies by Blomstrom, Lipsey, and Zejan (); de Soysa and Oneal (); Chamarbagwala, Ramaswamy, and Wunnava (); Agrawal (); and Agbola () all demonstrate that the effects of FDI inflows on growth are positively related to the domestic stock of human capital. De Sosya and Oneal also find that FDI inflows—but not the stock of FDI—promote growth in conjunction with domestic human capital and are more productive than domestic capital.…”

Foreign Direct Investment, Sovereign Debt and Growth: Evidence for the Euro Area

“…With capital diminishing return, moreover, FDI is merely contributed to a short-run growth in recipient countries. Based on these skeptical views, Barro and Sala-i-Martin (1997), Borensztein et al (1998), Chamarbagwala et al (2000), Lee (2013) and Omri et al (2014) overturned these phrases. According to the authors, the new products or processes initiated by foreign firms into domestic market may conducive the indigenous firms through the facilitation and diffusion of novel technology.…”