The principal objective of this paper is to ascertain whether foreign direct investment (FDI) has statistically significant effects on host countries' economic performance, such as total factor productivity. Such effects are often referred to as FDI externalities or spillover effects. This paper attempts to evaluate whether these spillover effects depend on the sending countries' income levels. Our empirical analysis shows that FDI exerts positive impacts on less developed countries. Further, we determine that the impacts of FDI from developed countries are more prevalent. So-called North-South effects were confirmed; however, we do not detect South-South effects. We also investigated the other channel, imports, and demonstrate its significant impacts on total factor productivity.
|Number of pages
|ADB Economics Working Paper Series
|Published - 2011 Aug
ASJC Scopus subject areas
- Geography, Planning and Development
- Economics and Econometrics
- Political Science and International Relations