The Relationship of Foreign Investment and Economic Growth in Developing Countries: New Evidence on The Spillover Effects Of Human Capital

Abstract

Developing countries cannot achieve the desired level of economic growth because they do not have sufficient capital accumulation. Developing countries want to overcome this lack of capital with foreign investment and/or debt. Companies that make direct foreign investments bring the advanced technology, new production methods, marketing, and management skills they have with the capital to the country they go to. While foreign direct investment is expected to stimulate economic growth by increasing capital accumulation in the country, the foreign direct investment can encourage economic growth when the benefits entering the country are spread throughout the country. In this context, the effect of foreign direct investment on economic growth in 19 developing countries between 2000-2017 and the effects of possible positive externalities of foreign direct investment through human capital was investigated through the system-GMM estimator. As a result of forecasts, foreign direct investment in developing countries positively affects economic growth. However, it has been found that human capital is not an important channel for creating positive externalities caused by foreign direct investment.

Keywords

• Foreign Direct Investment
• Human Capital
• Dynamic Panel Data Analysis
• System-GMM
• Developing Countries

Gelişmekte Olan Ülkelerde Doğrudan Yabancı Yatırım ve Ekonomik Büyüme İlişkisi: İnsan Sermayesinin Sağladığı Yayılma Etkilerine İlişkin Yeni Kanıtlar

Abstract

Gelişmekte olan ülkeler yeterli sermaye birikimine sahip olmadıklarından istenilen seviyede ekonomik büyüme sağlayamazlar. Gelişmekte olan ülkeler bu sermaye eksikliğini yabancı yatırım ve/veya borçla aşmak ister. Doğrudan yabancı yatırım yapan şirketler gittikleri ülkeye, sermaye ile birlikte sahip oldukları ileri teknolojiyi, yeni üretim yöntemlerini, pazarlama ve yönetim becerilerini de beraberinde götürür. Doğrudan yabancı yatırım ülkede sermaye birikimini artırarak ekonomik büyümeyi teşvik etmesi beklenirken, doğrudan yabancı yatırım ile ülkeye giren faydalar tüm ülkeye yayıldığında da ekonomik büyümeyi teşvik edebilir. Bu bağlamda çalışmada, 2000-2017 yılları arasında 19 gelişmekte olan ülkede doğrudan yabancı yatırımların ekonomik büyüme üzerindeki etkisi ve doğrudan yabancı yatırımın insan sermayesi üzerinden sağladığı olası pozitif dışsallıkların etkileri Sistem-GMM tahmincisi aracılığıyla araştırılmıştır. Yapılan tahminler sonucunda, gelişmekte olan ülkelerde doğrudan yabancı yatırımlar ekonomik büyümeyi pozitif etkilemektedir. Ancak doğrudan yabancı yatırımlardan kaynaklı pozitif dışsallıkları yaratmada insan sermayesinin önemli bir kanal olmadığı tespit edilmiştir.

Keywords

• Doğrudan Yabancı Yatırım
• İnsan Sermayesi
• Dinamik Panel Veri Analizi
• Sistem-GMM
• Gelişmekte Olan Ülkeler

References

1. ACQUAH, Abraham. M., and IBRAHIM, Muazu (2020). “Foreign Direct Investment, Economic Growth and Financial Sector Development In Africa”. Journal of Sustainable Finance and Investment, 10(4), 315-334.
2. AMEER, Waqar and XU, Helian (2017). “The Long-Run Effect of Inward And Outward Foreign Direct Investment On Economic Growth: Evidence From Developing Economies”. Review of Innovation and Competitiveness: A Journal of Economic and Social Research, 3(2), 5-24.
3. ANDERSON, T.W. and HSIAO, Cheng (1981). “Estimation of Dynamic Models with Error Components”. Journal of the American Statistical Association, 76(375), 598-606.
4. ANDERSON, T.W. and HSIAO, Cheng (1982). “Formulation and Estimation of Dynamic Models Using Panel Data”. Journal of Econometrics, 18, 47-82.
5. ARELLANO, Manuel and BOND, Stephen (1991:279). “Some Test of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations”. Review of Economic Studies, 58, 277-297.
6. BAHARUMSHAH, Ahmad Z., SLESMAN, Ly and WOHAR, Mark E. (2016). “Inflation, Inflation Uncertainty, and Economic Growth in Emerging and Developing Countries: Panel Data Evidence”. Economic Systems, 40(4), 638-657.
7. BAKLOUTI, Nedra, and BOUJELBENE, Younes (2016). “Foreign Direct Investment-Economic Growth Nexus”. Acta Universitatis Danubius: Oeconomica, 12(2), 136-145.
8. BALASUBRAMANYAM, Vudayagiri N., SALISU, Mohammed and DAVID, Sapsford (1996). “Foreign Direct Investment and Growth in Ep and Is Countries”. The Economic Journal, 106, 92-105.

9. BALASUBRAMANYAM, Vudayagiri N., SALISU, Mohammed and DAVID, Sapsford (1999). “Foreign Direct Investment As An Engine Of Growth”. The Journal of International Trade & Economic Development, 8(1), 27-40.
10. BALTAGI, Badi H. (2005). Econometric Analysis of Panel Data. Third Edition. Chichester: John Wiley & Sons, Ltd.
11. BARRO, J. Robert (1991). “Economic Growth in a Cross Section of Countries”. The Quarterly Journal of Economics, 106(2), 407-443.
12. BLOMSTRÖM, Magnus and KOKKO, Ari (1997). “How Foreign Investment Affects Host Countries”. Policy Research Working Paper, No: 1745. Washington D C, The World Bank.
13. BLUNDELL, Richard and BOND, Stephen (1998). “Initial Conditions and Moment Restrictions in Dynamic Panel Data Models”. Journal of Econometrics, 87, 115-143.
14. BOND, Stephen R. (2002). “Dynamic Panel Data Models: A Guide to Micro Data Methods and Practice”. Portuguese Economic Journal, 1, 141-162.
15. BORENSZTEIN, Eduardo, DE GREGORIO, José and LEE, Jong-Wha (1998). “How Does Foreign Direct Investment Affect Economic Growth?”. Journal of International Economics, 45, 115-135.
16. CARKOVIC, Maria and LEVINE, Ross (2005). “Does Foreign Direct Investment Accelerate Economic Growth”. Does Foreign Direct Investment Promote Development, 195-220.
17. CHOONG, Chee-Keong, BAHARUMSHAH, Ahmad Zubaidi, YUSOP, Zulkornain and HABIBULLAH, Muzafar Shah (2010). “Private Capital Flows, Stock Market and Economic Growth in Developed and Developing Countries: A Comparative Analysis”. Japan and the World Economy, 22, 107-117.
18. DE MELLO, Luiz R. (1999). “Foreign Direct Investment-Led Growth: Evidence from Time Series and Panel Data”. Oxford Economic Papers, 51, 133-151.
19. DINH, Trang T., VO, Duc H., VO. Anh T., and NGUYEN, Thang C. N. (2019). “Foreign Direct Investment and Economic Growth in the Short Run and Long Run: Empirical Evidence from Developing Countries”. Journal of Risk and Financial Management, 12(4), 176.
20. ERICSSON, Johan and IRANDOUST, Manuchehr (2001). “On The Causality Between Foreign Direct Investment and Output: A Comparative Study”. The Internatıonal Trade Journal, 15(1), 1-26.
21. FEENY, Simon, IAMSIRAROJ, Sasi, and MCGILLIVRAY, Mark (2014). “Growth and Foreign Direct Investment in The Pacific Island Countries”. Economic Modelling, 37, 332-339.
22. GUJARATI, Damodar N. (2004). Basic Econometrics. Fourth Edition. New York: Tata McGraw Hill.
23. HERZER, Dierk, KLASEN, Stephan and NOWAK-LEHMANN, Felicitas (2008). “In Search Of FDI-Led Growth in Developing Countries: The Way Forward”. Economic Modellin, 25, 793-810.
24. HOSSAIN, Shakib (2016). “Foreign Direct Investment, Economic Freedom and Economic Growth: Evidence from Developing Countries”. International Journal of Economics and Finance, 8(11), 200-214.
25. IAMSIRAROJ, Sasi (2016). “The Foreign Direct Investment-Economic Growth Nexus”. International Review of Economics and Finance, 42, 116-133.
26. IAMSIRAROJ, Sasi and ULUBAŞOĞLU M. Ali (2015). “Foreign Direct Investment and Economic Growth: a Real Relationship or Wishful Thinking?”. Economic Modelling, 51, 200-213
27. IMF (1993). Balance of Payments Manual. Washington D.C. USA. https://www.imf.org/external/pubs/ft/bopman/bopman.pdf, Erişim Tarihi: 10.07.2019.
28. IMF (2002). International Investment Position: A Guide to Data Sources. International Monetary Fund. Statistics Department. Washington, D.C. https://www.imf.org/external/np/sta/iip/guide/IIPguide.pdf, Erişim Tarihi: 10.07.2019.
29. KHORDAGUI, Hosny Nagwa and SALEH, Gehan (2013). “FDI and Absorptive Capacity in Emerging Economies”. Topics in Middle Eastern and African Economies, 15(1), 141-172.
30. KINISHITA, Yuko and LU, Chia-Hui (2006). “On the Role of Absorptive Capacity: FDI Matters to Growth”. William Davidson Institute Working Paper, No: 845.
31. LI, Xiaoying and LIU, Xiaming (2004). “Foreign Direct Investment and Economic Growth: An Increasingly Endogenous Relationship”. World Development, 33(3), 393-407.
32. MAHMOODI, Majid, and MAHMOODI, Elahe (2016). “Foreign Direct Investment, Exports and Economic Growth: Evidence from Two Panels of Developing Countries”. Economic research-Ekonomska istraživanja, 29(1), 938-949.
33. MAKKI, Shiva S. and SOMWARU, Agapi (2004). “Impact of Foreign Direct Investment and Trade on Economic Growth: Evidence from Developing Countries”. Amer. J. Agr. Econ, 83(3), 795-801.
34. MALLICK, Sushanta and MOORE, Tomoe (2008). “Foreign Capital in a Growth Model”. Review of Development Economics, 12, 143-159.
35. MODY, Ashoka and MURSHID, Antu Panini (2005). “Growing Up with Capital Flows”. Journal of International Economics, 65, 249-266.
36. OECD (2002). “Foreign Direct Investment for Development: Maximising Benefits, Minimising Costs”. Organisation for Economic Co-operation and Development, Paris, 1-34.
37. OECD (2008). Benchmark Definition of Foreign Direct Investment. Fourth Edition. OECD Publisihing.
38. OWUSU-NANTWI, V., and ERICKSON, Cristopher (2019). “Foreign Direct Investment and Economic Growth in South America”. Journal of Economic Studies. 46(2), 383-398.
39. REISEN, Helmut and SOTO, Marcelo (2001). “Which Types of Capital Inflows Foster Developing-Country Growth?”. International Finance, 4(1), 1–14.
40. ROODMAN, David (2009). “Practıtıoners’ Corner a Note on the Theme of Too Many Instruments”. Oxford Bulletın Of Economıcs And Statıstıcs, 71(1), 135-158.
41. ROODMAN, David (2009a). “How to Do xtabond2: an Introduction to Difference and System GMM in Stata”. The Stata Journal, 9(1), 86-136.
42. SAHU, Jagadish P. (2020). “Does Inflow of Foreign Direct Investment Stimulate Economic Growth? Evidence from Developing Countries”. Transnational Corporations Review, 1-18.
43. SAIDI, Samir, MANI, Venkatesh, MEFTEH, Haifa, SHAHBAZ, Muhammad, and AKHTAR, Pervaiz (2020). “Dynamic Linkages between Transport, Logistics, Foreign Direct Investment, and Economic Growth: Empirical Evidence from Developing Countries”. Transportation Research Part A: Policy and Practice, 141, 277-293.
44. SANTHIRASEGARAM, Selvarathinam (2007). “The Impact of Democratic and Economic Freedom on Economic Growth in Developing Countries: Pooled Cross Country Data Evidence”. Journal of Applied Sciences, 7(1), 1484-1489.
45. SOTO, Marcelo (2000). “Capital Flows and Growth in Developing Countries: Recent Empirical Evidence”. OECD Development Center, Technical Paper No: 160.
46. TATOĞLU, Yerdelen Ferda (2018). İleri Panel Veri Analizi. 3. Baskı. İstanbul: Beta Basım Yayım Dağıtım A.Ş.
47. UN (2017), Country Classifications. https://www.un.org/development/desa/dpad/wp-content/uploads/sites/45/2017wesp_annex_en.pdf, Erişim Tarihi: 28.05.2020.
48. UNCTAD (2019). World Investment Report. https://unctad.org/en/PublicationsLibrary/wir2019_en.pdf, Erişim Tarihi: 28.05.2020.
49. UNCTAD (2020a). World Investment Report. https://unctad.org/en/PublicationsLibrary/wir2020_en.pdf, Erişim Tarihi: 28.05.2020. UNCTAD (2020b). Doğrudan Yabancı Yatırım İstatistikleri. www.unctad.org/fdistatistics, Erişim Tarihi: 02.01.2020.