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Foreign Direct Investment and Economic Growth: Theory and Application to China
Author(s) -
Berthélemy JeanClaude,
Démurger Sylvie
Publication year - 2000
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/1467-9361.00083
Subject(s) - foreign direct investment , economics , china , growth theory , foreign capital , endogenous growth theory , simultaneous equations model , investment (military) , sample (material) , international economics , capital accumulation , estimation , macroeconomics , capital (architecture) , growth model , monetary economics , human capital , market economy , classical economics , econometrics , political science , history , chemistry , management , archaeology , chromatography , politics , law
The paper investigates the relationship between foreign direct investment and economic growth. A model of endogenous growth first highlights the transfer of foreign technology as a key determinant of economic growth, and suggests that economic growth may conversely influence the inflows of foreign capital. Simultaneous‐equation model estimation based on a sample of 24 Chinese provinces, from 1985 to 1996, confirms the fundamental role played by foreign investment in provincial economic growth in China, and stresses the importance of potential growth in foreign investment decisions.