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Growth effects of FDI in 80 developing economies: the role of policy reforms and institutional constraints

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  • Krishna Vadlamannati
  • Artur Tamazian

Abstract

Theoretical and empirical literatures have identified several channels through which foreign direct investment (FDI) influences economic growth. This paper examines the impact of FDI on economic output growth per worker using aggregate production function augmented with FDI inflows, economic policy reforms and institutional constraints. The paper covers 80 developing countries over the period 1980–2006. We use panel data and employ fixed, random effects and GMM methods for estimation. Our results highlight the importance of FDI, policy reforms and institutional development for growth in developing economies. Finally, we demonstrate that irrespective of reforms and institutions, an increase in FDI affects output growth positively.

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  • Krishna Vadlamannati & Artur Tamazian, 2009. "Growth effects of FDI in 80 developing economies: the role of policy reforms and institutional constraints," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 12(4), pages 299-322.
    • Handle: RePEc:taf:jecprf:v:12:y:2009:i:4:p:299-322
    DOI: 10.1080/17487870903314583
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    References listed on IDEAS

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    1. Andrea Bassanini & Stefano Scarpetta & Philip Hemmings, 2001. "Economic Growth: The Role of Policies and Institutions: Panel Data. Evidence from OECD Countries," OECD Economics Department Working Papers 283, OECD Publishing.
    2. Khusrav Gaibulloev & Todd Sandler, 2009. "The Impact Of Terrorism And Conflicts On Growth In Asia," Economics and Politics, Wiley Blackwell, vol. 21(3), pages 359-383, November.
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    Cited by:

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    8. Hassan Fereidouni Gholipour & Usama Al-mulali & Abdul Hakim Mohammed, 2014. "Foreign investments in real estate, economic growth and property prices: evidence from OECD countries," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 17(1), pages 33-45, March.
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