Working Paper: CEPR ID: DP3417
Authors: Nauro F. Campos; Yuko Kinoshita
Abstract: Although the theoretical literature has identified various sizeable benefits from foreign direct investment inflows (FDI), the empirical literature has been unable to establish a positive and significant impact of FDI on the rates of economic growth of host countries. One reason for this difficulty is that theory equates FDI to technology transferred, while in most countries and regions of the world FDI encompasses an array of arrangements that goes well beyond pure technology transfer. This Paper tests for the effects of FDI on growth in a set of countries in which FDI is pure technology transfer: the 25 Central and Eastern European and former Soviet Union transition countries between 1990-98. Our main finding is that, in this more appropriate setting, FDI has a positive and significant impact on economic growth as theory predicts.
Keywords: Economic Growth; Foreign Direct Investment; Transition Economies
JEL Codes: C33; F21; O16; O23; P27
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| human capital (J24) | economic growth (O49) |
| foreign direct investment (FDI) and human capital (F21) | economic growth (O49) |
| interaction term between FDI and human capital (F20) | economic growth (O49) |
| foreign direct investment (FDI) (F23) | economic growth (O49) |