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外文题目: How does foreign direct investment affect economic growth 出 作 处: 者: Journal of International Economics 45(1998) 115-135 E.Borensztein,J.De Gregorio,J-W.Lee

How does foreign direct investment affect economic growth?

Abstract
We test the effect of foreign direct investment (FDI) on economic growth in a cross-country regression framework, utilizing data on FDI flows from industrial countries to 69 developing countries over the last two decades. Our results suggest that FDI is an important vehicle for the transfer of technology, contributing relatively more to growth than domestic investment. However, the higher productivity of FDI holds only when the host country has a minimum threshold stock of human capital. Thus, FDI contributes to economic growth only when a sufficient absorptive capability of the advanced technologies is available in the host economy.

一、Introduction
Technology diffusion plays a central role in the process of economic development. In contrast to the traditional growth framework, where technological change was left as an unexplained residual, the recent growth literature has highlighted the dependence of growth rates on the state of domestic technology relative to that of the rest of the world. Thus, growth rates in developing countries are, in part, explained by a ‘catch-up’ process in the level of technology. In a typical model of technology diffusion, the rate of economic growth of a backward country

depends on the extent of adoption and implementation of new technologies that are already in use in leading countries. Technology diffusion can take place through a variety of channels that involve the transmission of ideas and new technologies. Imports of high-technology products, adoption of foreign technology and acquisition of human capital through various means are certainly important conduits for the international diffusion of technology. Besides these channels, foreign direct investment by multinational corporations (MNCs) is considered to be a major channel for the access to advanced technologies by developing countries. MNCs are among the most technologically advanced firms, accounting for a substantial part of the world’s research and development (R and D) investment. Some recent work on economic growth has highlighted the role of foreign direct investment in the technological progress of developing countries. Findlay (1978) postulates that foreign direct investment increases the rate of technical progress in the host country through a ‘contagion’ effect from the more advanced technology, management practices, etc. used by the foreign firms.Wang (1990) incorporates this idea into a model more in line with the neoclassical growth framework, by assuming that the increase in ‘knowledge’ applied to production is determined as a function of foreign direct investment (FDI). The purpose of this paper is to examine empirically the role of FDI in the process of technology diffusion and economic growth in developing countries.We motivate the empirical work by a model of endogenous growth, in which the rate of technological progress is the main determinant of the long-term growth rate of income. Technological progress takes place through a process of ‘capital deepening’ in the form of the introduction of new varieties of capital goods. MNCs possess more advanced ‘knowledge’, which allows them to introduce new capital goods at lower cost. However, the application of this more advanced technologies also requires the presence of a sufficient level of human capital in the host economy. The stock of human capital in the host country, therefore, limits the absorptive capability of a developing country, as in Nelson and Phelps (1966), and Benhabib and Spiegel (1994). Hence, the model highlights the roles of both the introduction of more advanced technology and the requirement of absorptive capability in the host country as

determinants of economic growth, and suggests the empirical investigation of the complementarity between FDI and human capital in the process of productivity growth. We test the effect of FDI on economic growth in a framework of cross-country regressions utilizing data on FDI flows from industrial countries to 69 developing countries over the last two decades. Our results suggest that FDI is in fact an important vehicle for the transfer of technology, contributing to growth in larger measure than domestic investment. Moreover, we find that there is a strong complementary effect between FDI and human capital, that is, the contribution of FDI to economic growth is enhanced by its interaction with the level of human capital in the host country. However, our empirical results imply that FDI is more productive than domestic investment only when the host country has a minimum threshold stock of human capital. The results are robust to a number of alternative specifications, which control for the variables usually identified as the main determinants of economic growth in cross-country regressions. This sensitivity analysis along the lines of Levine and Renelt (1992) shows a robust relationship between economic growth, FDI and human capital. We also investigate the effect of FDI on domestic investment, namely, whether there is evidence that the inflow of foreign capital ‘crowds out’ domestic investment. In principle, this effect could have either sign: by competing in product and financial markets MNCs may displace domestic firms; conversely, FDI may support the expansion of domestic firms by complementarity in production or by increasing productivity through the spillover of advanced technology. Our results are supportive of a crowding-in effect, that is, a one-dollar increase in the net inflow of FDI is associated with an increase in total investment in the host economy of more than one dollar, but do not appear to be very robust. Thus, it appears that the main channel through which FDI contributes to economic growth is by stimulating technological progress, rather than by increasing total capital accumulation in the host economy.

二、 Data

There are several sources for data on foreign direct investment. Two IMF publications provide data on net and gross foreign direct investment (International Financial Statistics, and Balance of Payments Statistics, respectively). Net FDI refers to inflows net of outflows, and gross FDI refers only to inflows, that is, foreign direct investment into the country. An OECD publication (Geographical Distribution of Financial Flows to Developing Countries) tallies gross FDI originated in OECD member countries into developing economies. The choice between these alternatives depends on which data set would correspond more closely to the FDI effect we are trying to uncover. In the first place, it seems more appropriate to use gross data because we are interested in the effects of foreign direct investment in the host country via transfer of knowledge and other spillover effects; in addition, we would not expect the outflow of foreign direct investment to involve a similar negative growth effects for the source country (loss of knowledge). In the second place, in our framework, foreign direct investment flows from industrialized to developing countries to close the technological gap. Foreign direct investment taking place between countries with roughly the same level of technological development may respond to a large extent to other factors, including global firm strategy and market penetration, or to allow firms to circumvent trade restrictions and offset other advantages accorded to domestic producers. This type of foreign direct investment flows may not be expected to display higher than average productivity. For this reason we focus only on foreign direct investment received by developing countries. And furthermore, since flows of foreign direct investment between developing countries may also respond to factors other than the technological gap, we also exclude those flows. Therefore, the OECD measure of foreign direct investment, while having a partial coverage, appears to be the most appropriate for our purposes. These data are available on a yearly basis from 1970. National accounts data, such as the growth rate of income, initial income and government consumption, are all taken from Summers and Heston (release 5.5 of June 1993) which provides data up to 1989. This allows us to consider a 20-year period for the empirical investigation. The growth rate measure

is the average annual rate of per capita real GDP over each decade, 1970–79 and 1980–89. Government consumption is measured by the average share of real government consumption in real GDP. For the human capital stock variable we use the initial-year level of average years of the male secondary schooling constructed by Barro and Lee (1993). According to Barro and Lee (1994), this measure of educational attainment is the one most significantly correlated with growth. Data for the other explanatory variables, such as the domestic investment rate, the foreign exchange parallel market premium and the measures of political instability and financial development are also taken from Barro and Lee (1994).

三、 Conclusions
There is a good a priori case to presume that FDI is more productive than domestic investment. As Graham and Krugman (1991) argue, domestic firms have better knowledge and access to domestic markets; if a foreign firm decides to enter the market, it must compensate for the advantages enjoyed by domestic firms. It is most likely that a foreign firm that decides to invest in another country enjoys lower costs and higher productive efficiency than its domestic competitors. In the case of developing countries in particular, it is likely that the higher efficiency of FDI would result from a combination of advanced management skills and more modern technology; FDI may be the main channel through which advanced technology is transferred to developing countries. Different types of economic distortions, however, may jeopardize the role of FDI as a means for advanced technology transfer. For example, because of protectionist trade policies, FDI may be the only way to gain access to domestic markets by firms that would otherwise have been exporters to the host country. Similarly, governments may offer a set of incentives to foreign investors to stimulate the inflow of FDI, with the objective of increasing foreign exchange reserves or of developing certain sectors considered strategic from an industrial

policy viewpoint. These policies may result in a flow of FDI that does not respond to higher efficiency but only to profit opportunities created by distorted incentives. These considerations make the empirical evaluation of the performance of FDI an appealing question. We investigated these issues in a sample that comprises FDI flows from industrial country into developing countries The most robust finding of this paper is that the effect of FDI on economic growth is dependent on the level of human capital available in the host economy. There is a strong positive interaction between FDI and the level of educational attainment (our proxy for human capital). Notably, the same interaction is not significant in the case of domestic investment, possibly a reflection of differences of technological nature between FDI and domestic investment. We also found some evidence of a crowding-in effect, namely that FDI is complementary to domestic investment. This effect, however, seems to be less robust than our other findings. Some caution must be exercised, however, in the interpretation of the size of the effect on economic growth of FDI. Our data measures the international flow of resources for foreign direct investment, as recorded in balance of payments statistics. This is, however, only part of the resources invested by a multinational firm, because some part of the investment may be financed through debt or equity issues raised in the domestic market. Thus, our measure of FDI underestimates the total value of fixed investment made by a multinational firm and the coefficients on FDI may be proportionally overestimated. To the extent that this bias in the measure of FDI is uniform across countries and over time, the qualitative results are not affected. Finally, the results of this paper suggest some directions for further research. The results suggest that the beneficial effects on growth of FDI come through higher efficiency rather than simply from higher capital accumulation. This suggests the possibility of testing the effect of FDI on the rate of total factor productivity growth in recipient countries. In addition, given the robustness of the effect of interactions between human capital and FDI, it might be interesting to explore the effects of FDI on the level of human capital. As we have argued above, FDI is a vehicle for the adoption of new technologies, and therefore, the training required to prepare the labour force to work with new technologies suggests that there may also be an effect

of FDI on human capital accumulation.


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