Endogenising Total Factor Productivity: The Foreign Direct Investment Channel in the Case of Bulgaria (2004-2013)

Milena Pesheva and Aleksandar Vasilev
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Milena Pesheva: Independent Researcher

South-Eastern Europe Journal of Economics, 2017, vol. 15, issue 2, 127-145

Abstract: This paper estimates the contribution of Foreign Direct Investment (FDI) to the Total Factor Productivity (TFP) of Bulgaria for the period 2004-2013. As predicted by theory, a positive relationship between TFP and FDI is documented. The standard Ramsey (optimal) growth model, augmented through the FDI channel is used to compare the rate of convergence to an identical setup without FDI. Convergence simulations prove that ignoring the implications of this model leads to a distorted view of the growth path of the economy. The results of the study can serve as justification for developing governmental strategies to attract FDI inflows.

Keywords: Simulation; Endogenous Growth; TFP; FDI (search for similar items in EconPapers)
JEL-codes: E13 E17 E22 O33 (search for similar items in EconPapers)
Date: 2017
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Related works:
Journal Article: Endogenizing Total Factor Productivity: The Foreign Direct Investment channel in the case of Bulgaria (2004-2013) (2017)
Working Paper: Endogenizing Total Factor Productivity: The Foreign Direct Investment channel in the case of Bulgaria (2004-2013) (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:seb:journl:v:15:y:2017:i:2:p:127-145

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