Data: 11/05/2010

Autore: Alberto Franco Pozzolo - Università degli Studi del Molise

Abstract: While the theoretical literature has uncovered a large number of different channels through which foreign direct investment (FDIs) can promote host country’s economic growth, the empirical literature has been much less successful in finding evidence that this is indeed the case. In this paper we provide such evidence using a panel of industry level data for different countries. Our results reveal a strong, robust, economically and statistically significant effect of FDIs on value added growth. Moreover, such effect is stronger in technologically advanced sectors. We also show that the growth enhancing effect comes primarily from an increase in the total factor productivity, and not from capital accumulation.
JEL classification: F23; F36; F43; O16.
Keywords: Foreign direct investment; Financial development; Economic growth; Technological progress;
Patents; Total factor productivity