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The report was prepared to give a review on the UNCTAD publication on the foreign direct investment in the World Investment Report 2003 where the report discusses eight key issues related to development impact of foreign direct investment. The studies revealed that market failure was not sufficient condition for flexible and selective foreign direct investment policies to be effective.

Based on evidence from national data, Henderson et al. (Am Econ Rev 102(2):994-1028, ) suggest that growth of night lights can proxy reliably for growth of regional GDP in low-income countries where GDP data is frequently lacking or of poor quality. Using regional data in two large emerging economies, Brazil and India, this paper finds, however, that the relationship between night lights growth and observed GDP growth varies significantly-in both statistical and economic terms-across regions. The same applies to advanced economies like the United States and Western Europe. The paper accounts for measurement issues with regard to the night lights data and considers several extensions of the empirical model in order to analyze if and under which circumstances the relationship between night lights and GDP growth is stable. Yet parameter instability typically persists, while the stable relationship among urban counties in Brazil represents the major exception. [ABSTRACT FROM AUTHOR]

We construct comprehensive and comparable indices on the most relevant components of economic infrastructure. An unobserved components model is employed to cover the largest possible number of developing and developed countries over the period 1990-2010. We map major findings from the new indices of infrastructure and provide country rankings, which we also compare with subjective assessments of infrastructure in the World Economic Forum's Global Competitiveness Report. Finally, we exemplify possible applications related to trade and foreign aid. By overcoming several data limitations, our new global index can help assess the links between infrastructure and economic development more systematically. [ABSTRACT FROM AUTHOR]

Summary: The accountability of non-governmental organizations (NGOs) has various dimensions. From an economic perspective, official financiers, private donors as well as aid recipients could expect more charitable output from NGOs, if less efficient organizations were squeezed out of international development activities. We consider administrative overheads as an important aspect of NGO efficiency. Our empirical analysis focuses on the effects of administrative overheads, public funding and the interrelations between these two factors on the probability of “market” exit for almost 900 US based NGOs with overseas aid activities since the mid-1980s. We find that larger administrative overheads increase the probability of exit for NGOs receiving any public funding. However, this effect weakens with increasing shares of public funding of NGOs. [ABSTRACT FROM AUTHOR]

It is widely held that foreign direct investment (FDI) has a positive effect on economic growth. To test this hypothesis, we perform convergence regressions derived from a theoretical model on the impact of FDI on endogenous technological change in small economies. The model includes FDI externalities that enhance growth, but also shows that FDI can crowd out host country income and reduce local innovation. The empirical analysis employs disaggregated US data for various FDI-related activities—in addition to the conventionally used aggregate FDI stocks and flows. We estimate the net FDI impact on the convergence rate of per-capita income to US levels, controlling for human development, financial development, and trade. We find that FDI accelerates convergence for high-income countries only, otherwise slowing it down. [ABSTRACT FROM AUTHOR]

We make use of a new and detailed database on FDI approvals since the early 1990s to address two major issues related to FDI and regional development in India in the post-reform period. First, we analyze the location choices of foreign investors. The evidence indicates that the concentration of FDI in a few relatively advanced regions may have prevented FDI effects from spreading across the Indian economy. Second, we evaluate whether the link between FDI and economic growth has become stronger in the aftermath of reforms. Various categories of FDI are indeed positively correlated with per-capita income growth across Indian states. However, it is only for the richer states that FDI appears to be associated with higher growth. FDI is thus likely to increase regional income disparity in India. [ABSTRACT FROM AUTHOR]

Summary: Booming foreign direct investment (FDI) in post-reform India is widely believed to promote economic growth. We assess this proposition by subjecting industry-specific FDI and output data to Granger causality tests within a panel cointegration framework. It turns out that the growth effects of FDI vary widely across sectors. FDI stocks and output are mutually reinforcing in the manufacturing sector, whereas any causal relationship is absent in the primary sector. Most strikingly, we find only transitory effects of FDI on output in the services sector. However, FDI in the services sector appears to have promoted growth in the manufacturing sector through cross-sector spillovers. [Copyright &y& Elsevier]

The paper applies an alternative approach to assess whether foreign aid promotes economic growth in developing countries, based on the concept of temporary growth accelerations suggested by Hausmann, Pritchett and Rodrik. In addition to aggregate aid, we differentiate between major aid categories, including grants, loans and so-called short-impact aid. It turns out that aid flows have a small but significantly positive effect on the conditional probability of growth accelerations. This result holds across different estimation methods. However, the significance of results crucially depends on the criteria applied to identify growth accelerations. [ABSTRACT FROM AUTHOR]

For FDI to help alleviate absolute poverty and stimulate economic growth in developing countries, two conditions have to be met. First, developing countries need to be attractive to foreign investors. Second, the host-country environment in which foreign investors operate must be conducive to favourable FDI effects with regard to overall investment, economic spillovers and income growth. This paper argues that it is more difficult to benefit from FDI than to attract FDI. The widely perceived concentration of FDI in few developing countries tends to obscure that, in relative terms, various small and poor countries are fairly attractive to FDI. Yet, the mobilisation of domestic resources remains by far, more important than attracting FDI for financing investment and stimulating economic growth. Furthermore, high inward FDI is no guarantee for poverty alleviation and positive growth effects. In particular, the empirical evidence suggests that host-country conditions typically prevailing in poor countries, including weak institutions and an insufficient endowment of complementary factors of production, constrain the growth-enhancing and poverty-alleviating effects of FDI. The crux is that creating an environment in which FDI may deliver social returns will take considerable time exactly where development needs are most pressing. [ABSTRACT FROM AUTHOR]

Summary: This article provides a survey of the aid budget literature and examines the determinants of the development aid efforts of 22 Development Assistance Committee (DAC) members over the 1976–2011 period. In fixed effects regressions, we identify aid inertia, per-capita GDP, the creation of an independent aid agency, colonial history, Russian military capacity, peer effects, terror incidents, aid to CEEC/NIS countries, and imports from developing countries as determinants of the Official Development Assistance (ODA)-to-GNI ratio. Excluding donor fixed effects, several variables, including colonial history and the aid agency dummy, are no longer significant; the impact of per-capita GDP gets weaker, while donors’ budget deficits decrease aid effort. [ABSTRACT FROM AUTHOR]