How Does Foreign Direct Investment Affect Economic Growth

Jong-Wha Lee, Jose De Gregorio and Eduardo Borensztein

No 1994/110, IMF Working Papers from International Monetary Fund

Abstract: We test the effect of foreign direct investment (FDI) on economic growth in a cross-country regression framework, utilizing data on FDI flows from industrial countries to 69 developing countries over the last two decades. Our results suggest that FDI is an important vehicle for the transfer of technology, contributing relatively more to growth than domestic investment. However, the higher productivity of FDI holds only when the host country has a minimum threshold stock of human capital. In addition, FDI has the effect of increasing total investment in the economy more than one for one, which suggests the predominance of complementarity effects with domestic firms.

Keywords: WP; economic growth; capital goods (search for similar items in EconPapers)
Pages: 26
Date: 1994-09-01
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Citations: View citations in EconPapers (18)

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Related works:
Journal Article: How does foreign direct investment affect economic growth?1 (1998)
Working Paper: How Does Foreign Direct Investment Affect Economic Growth? (1995)
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Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:1994/110

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