Is Foreign Direct Investment Good for Growth? Evidence from Sectoral Analysis of China and Vietnam

Tam Vu (), Byron Gangnes () and Ilan Noy
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Tam Vu: College of Business and Economics, University of Hawaii at Hilo

No 200801, Working Papers from University of Hawaii at Manoa, Department of Economics

Abstract: We estimate the impact of FDI on growth using sectoral data for FDI inflows to China and Vietnam. Previous empirical studies, using either cross-country growth regressions or firm-level micro-econometric analysis, fail to reach a consensus. Our paper is the first to use sectoral FDI inflow data to evaluate the sector-specific impact of FDI on growth. Our results show that, for the two developing-transition economies we examine, FDI has a statistically-significant positive effect on economic growth operating directly and through its interaction with labor. Intriguingly, we find the effects seem to be very different across economic sectors, with almost all the beneficial impact limited to industrial sector. Other sectors appear to gain very little growth benefit from sector-specific FDI.

Keywords: Foreign direct investment; growth; China; Vietnam (search for similar items in EconPapers)
JEL-codes: F21 F23 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2008-01-01
New Economics Papers: this item is included in nep-cna, nep-dev, nep-fdg and nep-tra
References: View complete reference list from CitEc
Citations: View citations in EconPapers (33)

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http://www.economics.hawaii.edu/research/workingpapers/WP_08-1.pdf First version, 2008 (application/pdf)

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Journal Article: Is foreign direct investment good for growth? Evidence from sectoral analysis of China and Vietnam (2008)
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