Endogenous Determination of FDI Growth and Economic Growth:The OECD Case

Author

Sample Size and
Time Period

Econometric
Method and Tests

Empirical Evidences

Basu & Guariglia
(2007)

119 developing
countries

1970 - 1999

Generalized
Methods of
Moments (GMM)

FDI enhances both educational inequalities and economic growth in developing countries. However, it
reduces the share of agriculture sector in GDP.

Johnson
(2006)

90 developed and
developing
countries
1980 - 2002

OLS

FDI inflows accelerate economic growth in developing countries. But it is not valid for developed countries.

Hyun
(2006)

59 developing
countries
1984 - 1995

OLS

FDI has positive effect on economic growth but lagged FDI values have no positive effects on current
________________________________________economic growth._________________________________________

Li & Liu
(2005)

21 developed
countries and 63
developing
countries
1970 - 1999

Unit Root Tests,
Durbin - Wu -
Hausman Test,
OLS

Endogenous relationship between FDI and economic growth has accelerated since the middle of 1980s.
Also, relationships between FDI, human capital and technological differences effect economic growth in
developing countries indirectly.

Saha
(2005)

20 Latin America
countries and
Caribbean
countries
1990 - 2001

3 Stage of Least
Squares

FDI and economic growth are important determinants of each other in Latin America and Caribbean. There
is an endogenous relationship between FDI and economic growth.

Durham
(2004)

80 countries
1979 - 1998

Extreme Bound
Analysis
(Sensitivity
_____Analysis)_____

There is no direct positive effect of current and lagged values of FDI and portfolio investment on economic
growth.

Hermes & Lensink
(2003)

67 less developed
countries
1970 - 1995

OLS

Financial development level of a FDI attracting country is an important pre-condition in order to provide
positive affect of FDI on economic growth.

Bengoa & Sanchez —
Robles
__________(2003)__________

18 Latin America
countries
1970 - 1999

Hausman Test

OLS

Economic freedom is an important determinant of FDI inflows. Also FDI affects economic growth
positively.

Massoud

51 developing
______countries______

OLS

__________FDI accelerates economic growth in both time periods (1989 - 1996 and 1989 - 2000)___________