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Foreign Direct Investment, human capital and non-linearities in economic growth

Constantina Kottaridi () and Thanasis Stengos ()

No 19, Working Papers from University of Peloponnese, Department of Economics

Abstract: This paper makes a contribution to the existing literature on the foreign direct investment (FDI) and economic growth nexus by contrasting past empirical evidence and conventional wisdom and arriving at some interesting new results. By applying non-parametric methods, and thus taking into account nonlinear effects of initial income and human capital on economic growth, we explore the FDI effect on growth in much greater detail than previous studies. Our findings not only confirm the nonlinear effect of human capital in the presence of FDI inflows but also suggest that FDI inflows are growth enhancing in the middle-income countries while there is a ‘two-regime FDI effect for high income countries. This new finding appears to be independent of OECD country membership.

Keywords: cross country growth regressions; FDI; human capital; semi-parametric model (search for similar items in EconPapers)
Pages: 36 pages
Date: 2008
New Economics Papers: this item is included in nep-dev and nep-hrm
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Journal Article: Foreign direct investment, human capital and non-linearities in economic growth (2010) Downloads
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