Foreign direct investment, capital accumulation, and growth: The rise of the Emerging South

Firat Demir, Sunhyung Lee

Research output: Contribution to journalArticlepeer-review

4 Scopus citations

Abstract

Using a unique dataset on bilateral FDI flows between 1990 and 2012, we analyze the heterogeneous growth effects of FDI originating from the North, the Emerging South, and the South in each country group. After controlling for the aggregation bias, sample selection bias, country heterogeneity, and endogeneity issues, and using various estimation techniques and robustness tests, we detect no long-run effects of FDI on the host country per capita GDP growth, independent of its direction. However, we find a significantly positive effect on long-run levels of GDP per capita in the sub-country groups of North–North, Emerging-North, and South-Emerging. The effects are stronger for countries with similar institutional development levels.

Original languageEnglish
Pages (from-to)779-794
Number of pages16
JournalInternational Review of Economics and Finance
Volume80
DOIs
StatePublished - Jul 2022

Keywords

  • Capital accumulation
  • Economic growth
  • Foreign direct investment
  • North–South heterogeneity

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