Do Host Country Factors Affect The Impact Of Foreign Direct Investment On Economic Growth?. Edna Solomon 27 November, 2006 ESDS International Annual Conference 2006. Objective. What is the impact of FDI on Economic Growth? Do three host country factors: the level of human capital,
27 November, 2006
ESDS International Annual Conference 2006
affect the impact of FDI on Economic Growth?
Source: Data from IMF’s BOPS(2005) from the ESDS International Databank.
Graph indicates a massive increase in FDI in the last decade alone.
Where g=growth rate of gdp per capita for each decade 1970-79; 1980-89.
FDI=FDI as a ratio to GDP.
Y0=Initial GDP per capita.
A=set of other variables that.
affect economic growth.
Model 1git=c0+c1FDIit+c2Hit+c3FDIitHit+c4Y0it+c5FINit+c6FDI FINit + c7IQit +c8FDI IQit +t+ ui +it.
ui= unobservable individual country specific term eg differences in steady state growth paths among countries.
t=time dummies, proxy global shocks.
it= random error term.
Sample period: 1970 to 2003 in 7 five year intervals:
T-ratios in parenthesis;Dept var:growth rate of gdp per capita.