Economics, Econometrics and Finance
4 years ago

Foreign investments boost efficiency, but outflows worsen inefficiencies in OECD.

Econometric Society 2004 Australasian Meetings
Measuring Spillovers from Alternative Forms of Foreign Investment
Alicia N. Rambaldi, Iyer

Paper Summary

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The article explores how different types of foreign investments affect the efficiency of countries in the OECD. By analyzing data from 20 OECD countries between 1981-2000, the researchers found that foreign direct investment and trade help reduce inefficiencies, while outflows of foreign investment make inefficiencies worse. Foreign direct investment has a bigger impact than foreign portfolio investment and other foreign investment. The study also shows that human capital is crucial for countries to benefit from foreign direct investment.