FDI and growth: a varying relationship across regions and over time

Abstract

This article investigates the relationship between foreign direct investment (FDI) inflows and economic growth for a panel of 110 countries over the period 1973 to 2002. The results show that the growth effect of FDI varies by region and over time.

Acknowledgement

The author is grateful to Yewfoong Lam for constructive comments.

Notes

¹ The schooling data come from Barro and Lee (1996), the updated version is available at http://www.cid.harvard.edu/ciddata; The Government spending data are from Heston et al. (2002); The black market premium data are downloaded from http://www.worldbank.org/research/growth/GDNdata.htm. FDI data for Korea is computed from United Nations’ FDI on-line database, at http://stats.unctad.org/fdi.

² Twenty-one out of 23 Latin American countries in their sample are classified as higher-income countries.

³ Alfaro (2003) suggests that FDI in primary sector tend to have a negative effect on growth.