Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/57296
Authors: 
Herzer, Dierk
Year of Publication: 
2010
Series/Report no.: 
Discussion papers, Ibero America Institute for Economic Research 199
Abstract: 
This paper examines the long-run relationship between outward foreign direct investment (FDI) and total factor productivity for a sample of 33 developing countries over the period 1980-2005. Using panel cointegration techniques, we find that: (i) outward FDI has, on average, a positive long-run effect on total factor productivity in developing countries, (ii) increased factor productivity is both consequence and a cause of increased outward FDI, and (iii) there are large differences in the long-run effects of outward FDI on total factor productivity across countries. Cross-sectional regressions indicate that these cross-country differences in the productivity effects of outward FDI are significantly negatively related to cross-country differences in labor market regulation, whereas there is no statistically significant association between the productivity effects of outward FDI and the level of human capital, the level of financial development, or the degree of trade openness in the home country.
Subjects: 
outward FDI
total factor productivity
developing countries
panel cointegration
JEL: 
F21
O11
F23
C23
Document Type: 
Working Paper

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