The Impacts of FDI on Productivity and Economic Growth: A Comparative Perspective

Abstract: This study investigates the impacts of FDI on productivity and economic growth in comparative perspective by using two samples, namely “developing” and “developed” countries. The study employs panel cointegration and panel estimation methods. The panel cointegration test results indicate that there are long-run relations between “FDI and productivity”, and “FDI and economic growth” variables. The study’s main findings show that FDI triggers (labor) productivity and economic growth in a positive way but at different degrees. Nonetheless, the magnitudes of these effects differ across developing and developed countries. Moreover, the findings testify that the impacts of FDI on productivity and economic growth can be improved with high labor quality. Finally, it is analyzed that higher openness and macroeconomic stability might be other important factors in assessing the positive impacts of FDI concerning economic growth.