FOREIGN DIRECT-INVESTMENT AND GROWTH IN EP AND IS COUNTRIES

This paper examines, within a new growth theory framework, the role wh ich foreign direct investment (FDI) plays in the growth process in the context of developing countries characterised by differing trade poli cy regimes. The paper tests (using cross-section data relating to a sa mple of forty-six developing countries) the hypothesis advanced by Jag dish Bhagwati, according to which the beneficial effect of FDI, in ter ms of enhanced economic growth, is stronger in those countries which p ursue an outwardly oriented trade policy than it is in those countries adopting an inwardly oriented policy.