The Long-run Relationship between Outward Foreign Direct Investment and Total Factor Productivity: Evidence for Developing Countries

Dierk Herzer

Journal of Development Studies, 2011, vol. 47, issue 5, 767-785

Abstract: Outward foreign direct investment (FDI) from developing countries has been growing significantly in both absolute and relative importance in recent years. Nevertheless, there is surprisingly little research on the home-country effects of outward FDI for these countries. This paper examines the long-run relationship between outward FDI and total factor productivity for a sample of 33 developing countries over the period from 1980 to 2005. Using panel co-integration techniques, we find that outward FDI has, on average, a robust positive long-run effect on total factor productivity in developing countries and that increased factor productivity is both a consequence and a cause of increased outward FDI.

Date: 2011
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DOI: 10.1080/00220388.2010.509790

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