Senbeta, Sisay (2008): The nexus between FDI and Total Factor Productivity Growth in Sub Saharan Africa.
Download (311kB) | Preview
In this study we construct an alternative analytical framework aimed at investigating the nexus between FDI inflow and productivity growth within the externalities type endogenous growth theory. The competitive equilibrium of our model indicates that a technological spillover from FDI has positive effect on the total factor productivity of the host economy. To empirically test the model, we employed panel data for 22 Sub-Saharan African countries covering the period 1970-2000. We estimated the fixed effect model and the dynamic panel model and the results from both models, inline with the solution of analytical model and empirical results of some of the recent studies, show that FDI inflow has negative short-term effects and positive long-run effects on total factor productivity.
|Item Type:||MPRA Paper|
|Original Title:||The nexus between FDI and Total Factor Productivity Growth in Sub Saharan Africa|
|Keywords:||Foreign Direct Investment; Total Factor productivity; growth; Panel data; Sub Saharan Africa|
|Subjects:||O - Economic Development, Technological Change, and Growth > O5 - Economywide Country Studies > O55 - Africa
F - International Economics > F2 - International Factor Movements and International Business > F23 - Multinational Firms; International Business
F - International Economics > F2 - International Factor Movements and International Business > F21 - International Investment; Long-Term Capital Movements
F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F43 - Economic Growth of Open Economies
C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models; Multiple Variables > C33 - Models with Panel Data; Longitudinal Data; Spatial Time Series
|Depositing User:||Sisay Senbeta|
|Date Deposited:||25. May 2011 09:48|
|Last Modified:||12. Feb 2013 19:01|
Akinlo, A. E. (2006) Macroeconomic Factors and Total Factor Productivity in Sub-Saharan African Countries.International Research Journal of Finance and Economics Issue 1: 62-79.
Akinlo, A. E. (2004) Foreign direct investment and growth in Nigeria: An empirical investigation. Journal of Policy Modeling 26: 627-639.
Baldwin, R., Braconier, H. and Forslid, R. (2005) Multinationals, Endogenous Growth, and Technological Spillovers: Theory and Evidence. Review of International Economics, 13(5): 945–963.
Baltagi, Badi H. (2005) Econometric Analysis of Panel Data. 3rd Edition, John Wiley & Sons Ltd.
Barro, R. (1990) Government spending in a simple model of endogenous growth. Journal of Political Economy, 98:S103–S125.
Barro, R., Sala-i-Martin, X. (2004) Economic Growth. 2nd Edition McGraw-Hill, Cambridge, MA.
Bengoa, M., and Sanchez-Robles, B. (2003) FDI, economic freedom and growth: new evidence from Latin America. European Journal of Political Economy, 19: 529–545.
Bengoa, M., and Sanchez-Robles, B. (2003) Policy shocks as a source of endogenous growth. Journal of Policy Modeling 27: 249–261.
Borensztein, E., De Gregorio, J. and Lee, J. W. (1998) How does Foreign Direct Investment affect economic growth? Journal of International Economics 45:115-135.
Bosi, S. (2007) Advanced Macroeconomics. Memo, Department of Economics, University of Science and Technology of Lille, (University of Lille 1). Lille, France
Blomström, M.(1986) Foreign Investment and Productive Efficiency: The Case of Mexico. The Journal of Industrial Economics, 35: 97-110.
Bwalya, M. (2006) Foreign direct investment and technology spillovers: Evidence from panel data analysis of manufacturing firms in Zambia. Journal of Development Economics, 81: 514–526.
Chang , S. (2007) The interactions among foreign direct investment, economic growth, degree of openness and unemployment in Taiwan. Applied Economics,39: 1647–1661.
Cheung, kui-yin. and Lin, P. (2004) Spillover effects of FDI on innovation in China: Evidence from the provincial data. China Economic Review, 15: 25– 44.
Crespo, N. and Fontoura, M. (2007) Determinant Factors of FDI Spillovers – What Do We Really Know? World Development 35:410–42.
De Mello, L. (1999) Foreign Direct investment-led growth: Evidence from time series and Panel data. Oxford Economic Papers 51: 133-151.
Findlay, R. (1978) Relative Backwardness, Direct Foreign Investment, and the Transfer of Technology: A Simple Dynamic Model. The Quarterly Journal of Economics, 92:1-16.
Girma, S. and Wakelin, K.(2007) Local productivity spillovers from foreign direct investment in the U.K. electronics industry. Regional Science and Urban Economics, 37: 399–412.
Grossman, G. and Helpman, E. (1994) Endogenous Innovation in the Theory of Growth. The Journal of Economic Perspectives, 8: 23-44.
Herzer, D., Klasen, S., and Nowak-Lehman, F. (2008) In search of FDI-led growth in developing countries: The way forward, Economic Modelling. doi:10.1016/j.econmod.2007.11.005
Isaksson, A. (2007) World Productivity Database: a technical description; United Nations Industrial Development Organization, Research and Statistics Branch, Staff Working Paper 10/2007.
Jones, C. I. (1998) Introduction to Economic Growth. W.W. Norton and Company, Inc, New York.
Kasuga, H. (2007) Evaluating the impacts of foreign direct investment, aid and saving in developing countries. Journal of International Money and Finance, 26:213- 228.
Lai M., Peng S. and Bao Q. (2006) Technology spillovers, absorptive capacity and economic growth. China Economic Review 17: 300–320.
Li, X. and Liu, X. (2004) Foreign Direct Investment and Economic Growth: An Increasingly Endogenous Relationship. World Development, 33: 393-407.
Liu, Z. (2008) Foreign direct investment and technology spillovers: Theory and evidence; Journal of Development Economics, 85: 176–193.
Liu, x., Burridgez, p. and Sinclair, p. (2002) Relationships between economic growth, foreign direct investment and trade: evidence from China. Applied Economics, 34: 1433-1440.
Liu, X. and Wang, C. (2003) Does foreign direct investment facilitate technological progress? Evidence from Chinese industries. Research Policy 32: 945–953.
Lucas, R. (1998) On the mechanics of economic development. Journal of Monetary Economics, 22: 3–42.
Markusen, J. and Venables, A. (1999) Foreign direct investment as a catalyst for industrial development. European Economic Review 43:35—356.
Pessoa, Argentino (2005) Foreign direct investment and total factor productivity in OECD countries: Evidence from aggregate data http://www.fep.up.pt/investigacao/workingpapers/05.09.02_WP188_argentino.pdf Retrieved February 26, 2008; 11:27 am
Rebelo, S. (1991) Long-run policy analysis and long-run growth. Journal of Political Economy, 99: 500–521.
Romer, P. (1986) Increasing Returns and Long-Run Growth. Journal of Political Economy, 94 : 1002–37.
Romer, P. (1990) Endogenous technological change. Journal of Political Economy, 98, 71–102.
Solow, R. M. (1957) Technical Change and the Aggregate Production Function. The Review of Economics and Statistics, 39: 312-320.
Yao, S. and Wei, K. (2007) Economic growth in the presence of FDI: The perspective of newly industrialising economies. Journal of Comparative Economics, 35:211–234.