Foreign direct investment-led growth: evidence from time series and panel data

This paper estimates the impact of foreign direct investment (FDI) on capit al accumulation, and output and total factor productivity (TFP) growth in t he recipient economy. Time series and panel data evidence are provided for a sample of OECD and non-OECD countries in the period 1970-90. Although FDI is expected to boost long-run growth in the recipient economy via technolo gical upgrading and knowledge spillovers, it is shown that the extent to wh ich FDI is growth-enhancing depends on the degree of complementarity and su bstitution between FDI and domestic investment.