Does FDI Accelerate Economic Growth? The OECD Experience Based on Panel Data Estimates for the Period 1980-2004
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Madanmohan Ghosh
Although empirical literature offers rich insights on the relationship of FDI and economic growth, it provides mixed evidence on the existence of productivity externalities in the host country generated by foreign multinational companies. A branch of literature suggests that the positive impact of FDI is conditional on countries stock of human capital or a threshold absorptive capacity. Most of the studies that came up with these conclusions are either based on developing or a mix of developing and developed country experiences. There is a dearth of literature explicitly focused on developed country experiences. Moreover, most literature has focused on the impact of inward FDI on host country economic growth. Does outward FDI exert any influence on source country economic growth? This paper addresses these issues using panel time series data from 25 OECD countries for the period 1980-2004 in a cross-country regression framework. It finds that both inward and outward are positively correlated with host and source country economic growth. However, the impact of FDI on economic growth is moderate. Results suggest that the elasticity of GDP growth with respect to both inward and outward FDI in the host and source countries is about 0.01.
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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Articles in the same Issue
- Article
- Does FDI Accelerate Economic Growth? The OECD Experience Based on Panel Data Estimates for the Period 1980-2004
- Structural Changes, Causality, and Foreign Direct Investments: Evidence from the Asian Crises of 1997
- Trade and Migration in an Enlarged European Union: A Spatial Analysis
- The Sustainability of the U.S. Current Account Deficit: Revisiting Mann's Rule
- What's New in Our World?
- Touching the Brakes after the Crash: A Historical View of Reserve Accumulation and Financial Integration
- Long-Term Fundamentals of the 2008 Economic Crisis
- Bilateral Trade Balance, Exchange Rates, and Income: Evidence from Malaysia
- The Macro Dimensions of Chile's Export Dilemma
