Foreign Direct Investment, Technology Diffusion, and Host Country Productivity Growth

40 Pages Posted: 8 Oct 2011

See all articles by Hongshik Lee

Hongshik Lee

Korea Institute for International Economic Policy (KIEP)

Joonhyung Lee

Southern Methodist University (SMU)

Hyuk-Hwang Kim

Korea Institute for International Economic Policy

Date Written: August 1, 2011

Abstract

The principal objective of this paper is to ascertain whether foreign direct investment (FDI) has statistically significant effects on host countries’ economic performance, such as total factor productivity. Such effects are often referred to as FDI externalities or spillover effects. This paper attempts to evaluate whether these spillover effects depend on the sending countries’ income levels. Our empirical analysis shows that FDI exerts positive impacts on less developed countries. Further, we determine that the impacts of FDI from developed countries are more prevalent. So-called North-South effects were confirmed; however, we do not detect South-South effects. We also investigated the other channel, imports, and demonstrate its significant impacts on total factor productivity.

Keywords: Technology Spillover, FDI, South-South, Total Factor Productivity (TFP), Foreign Direct Investment

JEL Classification: F21, F23

Suggested Citation

Lee, Hongshik and Lee, Joonhyung and Kim, Hyuk-Hwang, Foreign Direct Investment, Technology Diffusion, and Host Country Productivity Growth (August 1, 2011). Asian Development Bank Economics Working Paper Series No. 272, Available at SSRN: https://ssrn.com/abstract=1940157 or http://dx.doi.org/10.2139/ssrn.1940157

Hongshik Lee (Contact Author)

Korea Institute for International Economic Policy (KIEP) ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

Joonhyung Lee

Southern Methodist University (SMU) ( email )

6212 Bishop Blvd.
Dallas, TX 75275
United States

Hyuk-Hwang Kim

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

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