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This paper analyses factors that can facilitate property rights institutions reform in developing countries ( DC). Inspired by the works of North and Weingast ( Journal of Economic History, 49, 1989, 803) and Acemoglu et al. ( American Economic Review, 95, 2005a, 546; 2008) relating to the process of institutional reforms in England during the seventeenth century, I assume that FDI inflows could contribute to property rights reform in DC that are initially endowed with a minimum of effective institutions of constraints on the executive (i.e. effective institutions of checks and balances). Using five-year panel data over the period 1970-2005 with a sample of 80 DC, and after correcting for endogeneity, I find that conditioned on the initial level of constraints on the executive, the effect of FDI inflows on the probability of reforming property rights is positive and significant. The minimum level of constraints on the executive necessary for the catalytic role of FDI inflows in reforming property rights institutions is 3.6. Only 20 out of the 80 DC in the sample have this minimum level of constraints on the executive. Among the 20 countries five are in sub- Saharan Africa. [ABSTRACT FROM AUTHOR]

No empirical evidence has yet emerged for the existence of a robust positive relationship between financial openness and economic growth. This paper argues that a key reason for the elusive evidence is the presence of a time-varying relationship between openness and growth: countries tend to gain in the short term, immediately following capital account liberalization, but may not grow faster or even experience temporary growth reversals in the medium to long term. The paper finds substantial empirical evidence for the existence of such an intertemporal tradeoff for 45 industrialized and emerging market economies. The acceleration of growth immediately after liberalization is found to be often driven by an investment boom and a surge in portfolio and debt inflows. By contrast, the quality of domestic institutions, the size of FDI inflows and the sequencing of the liberalization process are found to be important driving forces for growth in the medium to longer term. [ABSTRACT FROM AUTHOR]

This paper examines the causal relationship between FDI and economic growth by using an innovative econometric methodology to study the direction of causality between the two variables. We apply our methodology, based on the Toda-Yamamoto test for causality, to time-series data covering the period 1969–2000 for three developing countries, namely Chile, Malaysia and Thailand, all of them major recipients of FDI with a different history of macroeconomic episodes, policy regimes and growth patterns. Our empirical findings clearly suggest that it is GDP that causes FDI in the case of Chile and not vice versa, while for both Malaysia and Thailand, there is a strong evidence of a bi-directional causality between the two variables. The robustness of the above findings is confirmed by the use of a bootstrap test employed to test the validity of our results. [ABSTRACT FROM AUTHOR]

This study investigates the role of human capital and political development in determining the magnitude of the effects of foreign direct investment ( FDI) on growth for a panel of 61 transition and developing countries for the period 1989 to 2013. A baseline growth model incorporating these variables is tested and then extended to include FDI interaction effects with human capital (measured using secondary school enrollment data) and political development (based on Economist Intelligence Unit Democracy Index scores). These growth interaction effects between FDI and human capital vary according to regime type. Political development in conjunction with FDI appears to suppress the effects of FDI on growth in authoritarian countries while enhancing them in hybrid democracies. For more democratic countries, domestic investment is a more important driver of growth. The effects of FDI on growth in the ten transition economies included in the sample data set are found to be insignificant. Although this result might seem to differ from a priori expectations, it is in line with the findings of most earlier studies that cover the period up to 2004. The paper also provides no strong evidence that a critical threshold of human capital is required to generate beneficial spillover growth effects from inflows of FDI. The paper provides new and more detailed insights into the effects of FDI on growth with particular respect to human capital and political regime covering a large number of transition and developing countries based on an up-to-date data set covering a 25-year period to 2013. © 2016 Wiley Periodicals, Inc. [ABSTRACT FROM AUTHOR]

In this paper, we contribute to the literature on the determinants of foreign direct investment in developing countries and re-evaluate the role of the quality of institutions on FDI independently of the general level of development. We implement cross-section estimations based on a newly available database with unprecedented detail on institutions for a set of 52 countries, as well as panel data estimations based on Fraser Institute's data. Furthermore, we control for the correlation between institutions and GDP per capita and for endogeneity of institutions. Finally, we evaluate whether the similarity of institutions between the host and the origin country raises bilateral FDI. We find that a wide range of institutions, including bureaucracy, corruption, but also information, banking sector and legal institutions, do matter for inward FDI independently of GDP per capita. Interestingly, weak capital concentration and strong employment protection tend to reduce inward FDI. Institutional proximity between the origin and the host country also matters, but we find little impact of institutions in the origin country. These results are encouraging in the sense that efforts towards raising the quality of institutions and making them converge towards those of source countries may help developing countries to receive more FDI, independently of the indirect impact of higher GDP per capita. The orders of magnitude found in the paper are large, meaning that moving from a low level to a high level of institutional quality could have as much impact as suddenly becoming a neighbour of a source country. [ABSTRACT FROM AUTHOR]

This paper investigates the factors driving manufacturing growth accelerations in a sample of 134 developing countries over the period 1970 to 2014. We first identify growth acceleration episodes of manufacturing value added (MVA) by their year of initiation and according to a country's income classification. We then estimate a probit model to explain what factors predict these MVA growth accelerations. Our results show that human capital and institutions represent contextual factors that favor the growth of manufacturing, together with macroeconomic policies related to investment, and openness to foreign trade and capital. We also find that most of these factors not only foster episodic accelerations of industry, but they contribute as well to a sustained process of industrialization that characterized the process of economic growth of a few successful countries over the period 1970 to 2014. [ABSTRACT FROM AUTHOR]

Using a dynamic spatial framework, this paper investigates how foreign direct investment ( FDI), foreign aid and remittances impact the economic growth of 53 African and 34 Latin American and Caribbean countries. Previous growth studies examine how one factor or two of these factors impacts economic growth, which results in biased estimation because of the omitted variable(s). Separate estimation shows foreign aid and FDI affects economic growth in Africa, but when we control for all three factors, only FDI affects African economic growth. For Latin America and the Caribbean, foreign aid and remittances affect growth when estimated separately, while remittances affect growth when they are estimated simultaneously. Finally, both regions' results confirm spatial interdependence is important in explaining economic growth, as growth in one country depends on the growth of its neighboring countries. [ABSTRACT FROM AUTHOR]

This paper examines the causality between remittances and economic growth in Sub-Saharan African (SSA) countries. We employ the panel Granger causality testing approach that is based on seemingly unrelated regressions systems and Wald tests with country-specific bootstrap critical values. Using annual data over the period 1980-2007 for 20 SSA countries, we find that in any SSA country, there is no causality between remittances and growth. An explanation of why remittances do not increase growth in SSA countries is given by the causality test that shows that remittances do not increase physical capital investment. Copyright © 2012 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

Does foreign direct investment (FDI) into developing countries affect the growth of local firms in host countries? Using a dataset of 38 sectors in China's electrical and electronics industry, in this paper, we analyze whether FDI has a positive effect on local firms, with technology spillovers, added value and increasing total factor productivity, or a negative, market stealing, effect. Estimating the relationship between growth of local firms and investment of foreign firms, our results show that FDI is likely to have a negative impact on the growth of local firms in sectors with large disparities in technology and less experience in business. Therefore, local firms lacking in technology need to find markets with no competition from foreign firms or determine strategies to compensate technology disparities. [ABSTRACT FROM AUTHOR]

This paper quantifies and analyses the extent of restrictions on inward foreign direct investment (FDI) in the service sector in developed and developing countries. Services account for an increasing share of global FDI. Recognition of the economic benefits of FDI clashes with nationalistic economic, political and national security concerns about foreign takeover of ‘strategic’ sectors, such as telecommunications, finance and transport. Consequently, almost all countries impose restrictions on FDI in services. Several different types of restrictions are considered: limitations on foreign ownership, screening or notification procedures, management restrictions and operational restrictions. These restrictions on FDI are computed at the industry level and then aggregated into a single measure for the service sector as a whole for 23 developed and 50 developing countries. Notwithstanding the worldwide trend towards liberalisation of restrictions, there remain substantial disparities between regions and individual countries in the severity of restrictions on inward FDI in services. The lowest restriction scores are in Europe and Latin America, whereas East Asia, South Asia and the Middle East have the highest levels of restrictions. The evolution over time of FDI restrictions is also presented for developed countries over the period 1981–2005, showing liberalisation in all countries, especially since the early 1990s, although to varying extents across countries. The severity of restrictions also differs considerably by sector, with electricity, telecommunications, transport and finance most restricted. The paper also finds a strong negative correlation of restrictiveness with inward stocks of FDI in services, suggesting that restrictions impede FDI. [ABSTRACT FROM AUTHOR]

This paper investigates the effect of foreign direct investment (FDI) on economic growth conditional on the institutional quality of host countries. We first develop several theoretical arguments to show that institutional heterogeneity may be an explanation for the mixed results of previous empirical studies. Second, using a panel smooth regression model on a large sample of developing countries, we show that FDI has a positive effect on growth only beyond a certain threshold of institutional quality. To benefit from FDI-led growth, institutional reforms should thus precede FDI attraction policies. Additionally, some reforms seem to promote faster marginal effects of FDI, while institutional complementarities may lead to an incremental effect on growth. [ABSTRACT FROM AUTHOR]

We propose that the limited financial development of emerging markets is a significant factor behind the large share of dollar-denominated external debt present in these markets. We show that when financial constraints affect borrowing and lending between domestic agents, agents undervalue insuring against an exchange rate depreciation. Since more of this insurance is present when external debt is denominated in domestic currency rather than in dollars, this result implies that domestic agents choose excessive dollar debt. We also show that limited financial development reduces the incentives for foreign lenders to enter emerging markets. The retarded entry reinforces the underinsurance problem. [ABSTRACT FROM AUTHOR]

Two main contributions to literature on foreign direct investment (FDI) and economic growth are made in this paper. First, the paper examines the effect of FDI on economic growth for 44 developing countries using heterogeneous panel cointegration techniques that are robust to omitted variables and endogenous regressors. The main result is that FDI has, on average, a negative effect on growth in developing countries, but there are large differences in the effect across countries. Second, a general-to-specific model-selection approach is used to systematically search for country-specific factors explaining the cross-country differences in the growth effects of FDI. The results suggest that the cross-country heterogeneity in the growth effect of FDI can be explained mainly by cross-country differences in freedom from government intervention, business freedom, FDI volatility, and primary export dependence. [ABSTRACT FROM AUTHOR]

This paper investigates empirically the relationship between two channels of external openness: international trade, foreign direct investment (FDI), and the rate of economic growth implied by the leader-follower model. The predictions of the theory are tested for the group of 97 developing countries in the period of 1974-2006 using static and dynamic panel data estimation methods. The estimation results show that both international trade and FDI positively contribute to growth. [ABSTRACT FROM AUTHOR]

Worker remittances constitute an increasingly important channel for the transfer of resources to developing countries. Behind foreign direct investment, remittances are the second-largest source of external funding for developing countries. Yet, literature on worker remittances has traditionally focused on the impact of remittances on income distribution within countries, on the determinants of remittances at a micro-level, or on the effects of migration and remittances for specific countries or regions. Macroeconomic determinants and effects of remittances have received more attention only recently. Hence, the focus of this paper is on the macroeconomic determinants of remittances and on differences in these determinants between remittances and other capital flows. We find that remittances respond more to demographic variables while private capital flows respond more to macroeconomic conditions. [ABSTRACT FROM AUTHOR]

The recent onslaught of corporate scandals has compelled the world to acknowledge the profound impact of corporate governance practices on the global economy. Corporate governance is of particular concern in developing economies, where the infusion of international investor capital and foreign aid is essential to economic stability and growth. This paper focuses attention on corporate governance initiatives in South Africa, given its significance as an emerging market, its potential leadership role on the African continent and the country’s notable corporate governance reform since the collapse of apartheid in 1994. The evolution of the country’s corporate structure and the forces driving corporate governance reform over the past decade will be examined, followed by a review of the most notable reform initiatives in place today. Finally, an assessment of those initiatives will be presented, along with recommendations concerning how South Africa’s initiatives can serve as models of enhanced corporate governance standards for the African continent. [ABSTRACT FROM AUTHOR]

As one of globalisation's most visible dimensions, foreign direct investment (FDI) is central to the prospects for developing countries in the world economy. Key issues include the direction of causation between FDI and growth, the potential role of the new information and communication technologies in attracting FDI flows (as well as the role of FDI in building such infrastructure), the process of skill acquisition associated with FDI, and the specific problems that Africa faces in attracting more FDI. Achievement of the Millennium Development Goals requires very fast growth in output and employment if global poverty is to be halved, and FDI could play a very positive role if its development benefits are maximised. [ABSTRACT FROM AUTHOR]

There has been much debate on how to design employment protection regulations that balance the need to attract foreign direct investment (FDI) on the one hand and to protect workers' rights on the other hand. This study explores this 'dilemma', using a multi‐country dataset from 2003 to 2015 and treating hiring and firing regulation (HFR) and the other explanatory variables as endogenous. The findings indicate that flexible HFR is essential for FDI promotion in the early stages of economic development of a country, but the impact of labour market flexibility on FDI gradually decreases and eventually turns statistically insignificant with economic advancement. In other words, a flexible HFRs are more important for developing countries, but such flexibility does not have to be sustained in a 'race to the bottom' manner: once a country reaches higher income levels, it has more room to focus on labour standards to protect workers without compromising on the attractiveness of the country for FDI. [ABSTRACT FROM AUTHOR]

The need for economic development has preoccupied policymakers over the years. Especially the global south such as Nigeria, which is plagued with infrastructural deficit and less foreign direct investment and financial development attraction. This has drawn the attention of stakeholders and government officials for exploration of alternative routes for sustainable development, which is in line with the United Nations Sustainable Development Goals‐8 (UNSDG's). Thus, the current study focuses on the FDI‐led economic growth hypothesis if it holds or not for the case of Nigeria. The present study is distinct from previous studies in terms of scope by incorporation of more covariates, which has seemed to have been overlooked in the FDI argument. To this end, the current study re‐investigates the connection between FDI, financial development, total labour force, gross capital formation, and economic growth using Nigeria as a representation for Africa and Sub‐Saharan states specifically. Annual time‐series data from 1970 to 2018 is adopted for the econometrics analysis. Our study interest variables are foreign direct investment, economic expansion (GDP). The present study inculcates two additional financial development indicators; from the banking, and financial sectors. Using a battery of unit root and stationarity tests the study explores the stationarity properties of the outlined variables. Subsequently, the novel and recent robust Bayer and Hanck (2013) combined cointegration test in conjunction with Pesaran's ARDL bounds test was used to investigate the equilibrium relationship and regression analysis. While the Toda‐Yamamoto Granger causality was used to detect the direction of causality analysis among the variables. Empirical investigation traces a long‐run equilibrium relationship among the variables over the sampled period. Furthermore, empirical results show that FDI influences GDP, which suggests that FDI influences economic growth which is indicative of policymakers. Similarly, empirical outcomes establish a significant relationship between GDP and Financial Development from banking‐sector which is also corroborated in the causality results as an indirect causality is seen running from GCF to the financial sector. These outcomes suggest that FDI and Financial development are good predictors for sustainable economic growth in Nigeria. All aforementioned results have its inherent policy implications which are elucidated in the concluding remark of this study. [ABSTRACT FROM AUTHOR]

The remarkable increase in FDI flows to developing countries over the last decade has focused attention on whether this source of financing enhances overall economic growth. We use a mixed fixed and random (MFR) panel data estimation method to allow for cross country heterogeneity in the causal relationship between FDI and growth and contrast our findings with those from traditional approaches. We find that the relationship between investment, both foreign and domestic, and economic growth in developing countries is highly heterogeneous and that estimation methods which assume homogeneity across countries can yield misleading results. Our results suggest there is some evidence that the efficacy of FDI in raising future growth rates, although heterogeneous across countries, is higher in more open economies. [ABSTRACT FROM AUTHOR]

There is an ongoing debate as to whether Chinese capital can be described as developmental. While some argue that Chinese capital is simply a tool of the Chinese state to exploit the global South, others claim that Chinese capital opens new development opportunities. Rather than advancing a framework based upon either an exploitative or an egalitarian mode of development, this article argues that China's current crisis of overaccumulation has led to a so‐called Sino‐centric capital export regime, which sends out two types of capital to the global South. First, state‐backed capital imposes a development model by modifying 'local orders', attempting to make host states legible by creating maps of peoples and terrains that surround China. These maps aim to improve China's ability to manage inter‐state disputes. Second, flexible capital is interested in extricating itself from the conditions imposed on it in China. By moving into the global South, flexible capital breaks through the barriers placed by the Chinese state. As a by‐product of this quest for extrication, flexible capital can generate new venues of accumulation and novel ways of organizing production. This article demonstrates these two types of capital using examples from Rodrigo Duterte's Philippines — the Kaliwa Dam project and online gambling — drawing on original field research and a newly generated dataset. [ABSTRACT FROM AUTHOR]

Information and communication technology (ICT) is one of the key sectors promoting economic growth in the present modern era of globalization. It promotes technological advances in global communications as well as production techniques and contributes to economic growth and development. Most of the economic activities, including international trade and foreign direct investment (FDI), are largely dependent on various modern sources of ICT. The objective of this study is to examine the dynamic relationship between FDI, ICT, trade, and per capita gross domestic product growth across the South Asian Association for Regional Cooperation (SAARC) developing nations from 2000 to 2017. We have used different panel estimates such as fully modified ordinary least squares, dynamic ordinary least squares, Fisher–Johansen cointegration test, panel autoregressive distributed lag, and Dumitrescu–Hurlin causality. We found existence of unidirectional causality from FDI to ICT and bidirectional causal relationship between trade and ICT. The outcome of our study suggests policy recommendations for improving the standards of ICT, specifically focusing on economic growth, trade openness, and facilitation of foreign investment in the SAARC countries. [ABSTRACT FROM AUTHOR]

Scholars debate whether states or markets drive economic policy in the context of internationalization. Unpacking the market-state dichotomy, liberal pluralists and institutionalists alike conduct sectoral analysis to examine economic policies and outcomes. They debate the relative importance of sectors versus factors and the impact of sectoral coalitions, structural characteristics, and institutional trajectories. Building on previous scholarship, this article argues that state imperatives, such as national security and technological advancement, are an important guide to understanding dominant patterns of economic policy, defined as state goals, government-business relations, and state methods. Beyond that, the organization of institutions and structural sectoral attributes influence the ways in which actual policy outcomes vary across sectors and time. Case studies of the liberalization and subsequent reregulation of foreign direct investment across subsectors of telecommunications in China substantiate this argument. Evidence from other industries further validates this explanatory model. [ABSTRACT FROM AUTHOR]

In recent years, China has emerged as a major source of investment and development assistance across the 'developing world', triggering the rise of global networks that in some ways stand apart from the existing order of globalization. This article, based on ethnographic fieldwork and interviews in Cambodia from 2009 to 2011, begins to explore the significance of Chinese investors and managers, a new globe-trotting elite involved in projects around the world. Understanding how this new Chinese mobile class sees its mission is crucial for making sense of how China's 'rise' may be re-scripting globalization and, specifically, how it may be offering new visions of modernity. The author's research suggests that Chinese investors and managers engage in a developmental discourse which is reminiscent partly of colonial days and partly of the heyday of post-war developmentalism. This discourse articulates the possibility and necessity of progress imposed by outside actors, and is accompanied by measures that inculcate a strict Fordist labour discipline. At the same time, the author argues, it may also contain the seeds of a new developmental cosmopolitanism. [ABSTRACT FROM AUTHOR]

Foreign direct investment (FDI) has dramatically increased worldwide and is the most important form of all private capital flows to developing countries. Yet, it is an important empirical question whether FDI affects total factor productivity (TFP) positively. We investigate the effect of FDI on TFP growth in a large sample of countries in 1970–2000. Our econometric results indicate that FDI has a positive and direct effect on TFP growth. However, we do not find any evidence that the impact of FDI on TFP growth is only conditional on the recipient country’s capability to absorb foreign technology. We carefully address the robustness of the empirical results. ( JEL O11, O40, O47, F21) [ABSTRACT FROM AUTHOR]

Corruption is understood as an act in which the power of public office is used for personal gain in a manner that contravenes the rules established by the governing structures of a society. This study attempts to offer an extension to the empirical model employed by Balasubramanyam et al. (1996 ) by analysing how FDI determines economic growth within the new growth theory framework when the degree of corruption is considered. Thus, the study seeks to examine the way in which corruption can have an impact on the economic growth of developing countries whose trade strategies differ (either IS and EP). It suggests that further insight can be gained by considering how corruption might interact with the trade policy in affecting economic growth. This is examined using a fixed-effects, simultaneous equation model for 17 countries over the period 1994–2004. The results show that the level of corruption strongly and negatively influences foreign direct investment in both IS and EP countries. However, when the corruption index is interacted with domestic investment, the influence on foreign direct investment is positive and significant for IS countries only. The most interesting outcome of the study is the effect of the interaction term between foreign direct investment and the corruption perception index on economic growth, which is found to be greater in magnitude for the EP countries than for the IS countries. [ABSTRACT FROM AUTHOR]

This article analyzes the role of foreign direct investment (FDI) and trade in promoting economic growth across selected developing countries and examines the interaction among FDI, trade, and economic growth. Data from 66 developing countries are examined. Results of the study suggest that FDI, trade, human capital, and domestic investment are important sources of economic growth for developing countries. It is discovered that there is a strong positive interaction between FDI and trade in advancing economic growth. Results also show that FDI stimulates domestic investment. The contribution of FDI to economic growth is enhanced by its positive interaction with human capital and sound macroeconomic policies and institutional stability. With the results, there is an implication that lowering the inflation rate, tax burden, and government consumption would advance economic growth in developing countries.

This article presents a study which examined the growth, innovation and foreign direct investment. The existence of firm-specific assets is one of the major reasons for the establishment of multinational firms. Firm-specific assets allow for profitable horizontal or vertical intrafirm integration. In the presence of factor price differences between countries, firms might locate their production plants in the low-cost countries. The production location differs from the geographical site where the specific asset was acquired if extra costs associated with the formation of multinational corporations do not overcompensate production-cost advantages. Firms acquire specific knowledge through R&D investment in the more developed country and use their specific asset to establish a production plant in the low-cost country. Foreign direct investment is accompanied by interregional spillovers of knowledge from the more to the less advanced country.

The importance of market-supporting institutions and their impact on business investment and economic growth has gained the attention of researchers and practitioners alike. In this study, we extend this research by capturing the impact of the quality of regulative institutional characteristics on firm performance in an emerging market context. We use a sample of 26,493 emerging market firms from 91 countries over the years 2003 to 2010 and test for the relationship between government effectiveness, regulatory quality, rule of law and control of corruption, and firm performance. Results indicate that governmental effectiveness and regulatory quality impact performance outcomes positively, while rule of law impacts performance negatively. These findings provide important insights and encourage managers and public policymakers to be cognizant of the impact of these factors and adapt accordingly. © 2014 Wiley Periodicals, Inc. [ABSTRACT FROM AUTHOR]