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Outward FDI and economic growth

Dierk Herzer (German Institute for Economic Research (DIW), Berlin, Germany and University of Wuppertal, Wuppertal, Germany)

Journal of Economic Studies

ISSN: 0144-3585

Article publication date: 28 September 2010

17656

Abstract

Purpose

The purpose of this paper is to examine the impact of outward foreign direct investment (FDI) on economic growth.

Design/methodology/approach

Two econometric approaches are used: cross‐country regressions for a sample of 50 countries and time‐series estimators for the USA.

Findings

Both approaches tell the same story: outward FDI is positively associated with growth. This finding is robust to several model specifications, potential outliers, and different estimation techniques. In addition, Granger‐causality tests for the USA indicate that causality is bidirectional, suggesting that increased outward FDI is both a cause and a consequence of increased domestic output.

Originality/value

Previous studies have primarily examined the firm‐ and industry‐level effects of outward FDI – for example, on domestic investment, employment, and productivity. This paper, in contrast, deals with the effects of aggregate outward FDI on the economy as a whole.

Keywords

Citation

Herzer, D. (2010), "Outward FDI and economic growth", Journal of Economic Studies, Vol. 37 No. 5, pp. 476-494. https://doi.org/10.1108/01443581011075424

Publisher

:

Emerald Group Publishing Limited

Copyright © 2010, Emerald Group Publishing Limited

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