How Does Foreign Direct Investment Affect Economic Growth?

Eduardo Borensztein, Jose De Gregorio and Jong-Wha Lee

No 5057, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: F43 O19 (search for similar items in EconPapers)
Date: 1995-03
Note: EFG ITI
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Citations: View citations in EconPapers (172)

Published as Borensztein, E., J. De Gregorio and J. W. Lee. "How Does Foreign Direct Investment Affect Economic Growth?," Journal of International Economics, 1998, v45(1,Jun), 115-135.

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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 (1994)
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