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FOREIGN DIRECT INVESTMENT AND ECONOMIC GROWTH: THE GROWTH ACCOUNTING PERSPECTIVE
Author(s) -
WANG MIAO,
WONG M. C. SUNNY
Publication year - 2009
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.2008.00133.x
Subject(s) - foreign direct investment , economics , human capital , growth accounting , productivity , monetary economics , perspective (graphical) , capital accumulation , capital deepening , international economics , macroeconomics , capital formation , total factor productivity , financial capital , market economy , artificial intelligence , computer science
A positive relationship between FDI and economic growth under two economic conditions has been estimated: a sufficient level of human capital and well‐developed financial markets, respectively. However, these two conditions can be fundamentally different catalysts for FDI to promote economic growth in the perspective of growth accounting. Using data from 69 countries over 1970–1989, we find that FDI promotes productivity growth only when the host country reaches a threshold level of human capital; and FDI promotes capital growth only when a certain level of financial development is achieved. ( JEL F21)