Foreign Direct Investment-Led Growth: Evidence from Time Series and Panel Data

Luiz de Mello

Studies in Economics from School of Economics, University of Kent

Abstract: This paper develops an endogenous growth model with foreign direct investment (FDI) and examines the impact of the latter on capital accumulation, output and total factor productivity (TFP) growth in the recipient economy. Time series and panel data evidence are provided for a sample of OECD and non OECD countries in teh 1970-90 period. Although FDI is expected to boost long-run growth in the recipient economy via technological transfers and knowlege spillovers, it is shown that the extent to which FDI is growth-enhancing depends on the degreee of complementarity and substitution between FDI and domestic investment. Also, FDI is shown to be more growth-enhancing in technological followers than leaders and sensitive to unobservable country-specific effects.

Keywords: FDI; Endogenous Growth; Panel Data (search for similar items in EconPapers)
JEL-codes: O41 O47 O54 (search for similar items in EconPapers)
Date: 1996-11
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Citations: View citations in EconPapers (5)

Published in Oxford Economic Papers, 1999, 51, pp.133-151 (jointly with 96/10)

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