The Impact of FDI on Economic Growth: An Analysis for the by Marco Neuhaus

By Marco Neuhaus

This booklet presents a accomplished knowing of the connection among FDI and monetary progress with precise consciousness to the nations of relevant and japanese Europe. inside a brand new semi-endogenous progress version, the e-book illustrates the influence of FDI on fiscal progress for each degree of improvement of a rustic. constructing international locations event either powerful capital accumulation and know-how move via FDI, while hugely constructed international locations often take advantage of FDI as a automobile of world expertise diffusion. Departing from this common version, the e-book then investigates the impression of FDI on financial development for the transition international locations of relevant and jap Europe. With the aid of sleek panel facts econometrics it consists of out the strongly awaited empirical facts of a progress bettering impression of FDI within the transition nations, and it explains for every nation the particular development contributions caused by means of FDI.

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9. Capital Intensity (Capital Stock per Employed Person in 1995 PPP) 120000 EU-12 100000 80000 Czech Rep. 60000 Hungary 40000 Poland 20000 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Fig. 10. Capital Intensity Index (Capital Stock per Employed Person in 1995 PPP) 260 240 220 Poland 200 Czech Rep. 2 Stylised Facts 33 The convergence pattern also suggests that this process is set to continue in the years to come. Another indicator for the past and future attractiveness of investment in physical capital is the level of capital productivity.

An example would be the FDI-induced market penetration of personal computers in a developing country when the number of computers in use was formerly low (or nonexistent). In the FDI model, however, we treat the production of a “completely 54 3 Capital Deepening through FDI in an Economic Growth Model new” type of capital product like an increase in the number of the different types of capital goods, as in the Romer model. The background is that the model will assume full economy-wide employment of the capital product, which is in line with the market penetration argument.

Only the Czech Republic experienced a relatively higher impact of capital on the growth process chargeable to smaller labour contributions compared to the other CEE countries. 4. 1. The relative contributions are computed as the ratio of the contributions of capital K, labour L and TFP, respectively, to GDP growth. 4 Limitations of Solow Growth Accounting The implications of the results from Solow growth accounting are quite limited. First, we should note that standard Solow growth accounting as shown above - with a simple decomposition of growth into contributions from changes of capital, labour, and some residual - does not provide a theory of economic growth.

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