Revisiting the Effect of FDI on Economic Growth using Quantile Regression

Lijuan Huo, Tae-Hwan Kim () and Yunmi Kim
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Lijuan Huo: Beijing Institute of Technology
Yunmi Kim: University of Seoul

No 2015rwp-83, Working papers from Yonsei University, Yonsei Economics Research Institute

Abstract: Numerous empirical studies preset strong evidence supporting the positive relationship between Foreign Direct Investment (FDI) and the host countries¡¯ economic growth. Unlike most papers investigating this relationship using least squares-based regression, we analyze the effect of FDI on economic growth using quantile regression (QR). In this paper, we attempt to (i) reduce the omitted variable bias, (ii) solve the potential endogeneity problem of FDI, and (iii) allow heterogeneity across countries, using instrumental variable QR for panel data with fixed effect. Our empirical results reinforce the view that FDI is positively related to economic growth in under-developed countries where the rate of growth is relatively low.

Keywords: FDI; Quantile Regression; Panel Data; Endogeneity; Instrumental Variable (search for similar items in EconPapers)
Pages: 17pages
Date: 2015-09
New Economics Papers: this item is included in nep-gro and nep-int
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Citations: View citations in EconPapers (2)

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