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A Survey of Recent Developments in the Literature of FDI-Led Growth Hypothesis

A Survey of Recent Developments in the... 1. INTRC1�UCTION Foreign direct investment (Fdi) is said to be one of the major sources that contributes to economic growth through capital accumulation, technology transfer, and knowledge spillovers. The concept was first introduced by Singer (1950). In the past 20 years, FDI has grown significantly faster than world production and trade flows. Although most FDI flows are within the developed countries, today FDi accounts for more than 60 percent of private capital flows to the developing world (World Bank, 2006). International economic activity increasingly involves foreign production and intra-firm trade by multinational firms, and it is now estimated that about 30 percent of world trade is intra-firm (Dunning, 1993a; Caves, 1996). This world-wide expansion of FDI has encouraged policymakers in developing countries to attract more foreign capital by reducing barriers to FDI and offering tax incentives and subsidies, believing that FDI promotes economic growth. The link between FDI and economic growth has been the subject of substantial research, for many decades, yet the link between FDI and GDP remains the subject of debate. Interest in the area has been revived in recent years largely due to the globalization of the world economy and to the recognition that multinational http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of World Investment and Trade Brill

A Survey of Recent Developments in the Literature of FDI-Led Growth Hypothesis

Journal of World Investment and Trade , Volume 11 (2): 17 – Jan 1, 2010

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Publisher
Brill
Copyright
Copyright © Koninklijke Brill NV, Leiden, The Netherlands
ISSN
1660-7112
eISSN
2211-9000
DOI
10.1163/221190010X00068
Publisher site
See Article on Publisher Site

Abstract

1. INTRC1�UCTION Foreign direct investment (Fdi) is said to be one of the major sources that contributes to economic growth through capital accumulation, technology transfer, and knowledge spillovers. The concept was first introduced by Singer (1950). In the past 20 years, FDI has grown significantly faster than world production and trade flows. Although most FDI flows are within the developed countries, today FDi accounts for more than 60 percent of private capital flows to the developing world (World Bank, 2006). International economic activity increasingly involves foreign production and intra-firm trade by multinational firms, and it is now estimated that about 30 percent of world trade is intra-firm (Dunning, 1993a; Caves, 1996). This world-wide expansion of FDI has encouraged policymakers in developing countries to attract more foreign capital by reducing barriers to FDI and offering tax incentives and subsidies, believing that FDI promotes economic growth. The link between FDI and economic growth has been the subject of substantial research, for many decades, yet the link between FDI and GDP remains the subject of debate. Interest in the area has been revived in recent years largely due to the globalization of the world economy and to the recognition that multinational

Journal

Journal of World Investment and TradeBrill

Published: Jan 1, 2010

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