Many governments offer significant inducements to attract inward investment, motivated by the expectation of spillover benefits. This paper begins by reviewing possible sources of spillovers. It then provides a comprehensive evaluation of the empirical evidence on productivity, wages and exports spillovers in developing, developed and transitional economies. Although theory can identify a range of possible spillover channels, robust empirical support for positive spillovers is hard to find. The reasons for this are explored and the paper concludes with a review of policy aspects.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID475044_code355382.pdf?abstractid=475044&mirid=3

Much Ado About Nothing? Do Domestic Firms Really Benefit from Foreign Investment?

This paper uses new statistical techniques and two new databases to reassess the relationship between ,, , , , () ' −= − + + +

/pdf/does-foreign-direct-investment-accelerate-economic-growth-27mjs5uxhg.pdf

Does Foreign Direct Investment Accelerate Economic Growth

https://mpra.ub.uni-muenchen.de/62288/1/MPRA_paper_62288.pdf

Aid and growth regressions

Governments the world over offer significant inducements to attract investment, motivated by the expectation of spillover benefits to augment the primary benefits of a boost to national income from new investment. There are several possible sources of induced spillovers from foreign direct investment. This article evaluates the empirical evidence on productivity, wage, and export spillovers in developing, developed, and transition economies. Although theory can identify a range of possible spillover channels, robust empirical support for positive spillovers is at best mixed. The article explores the reasons and concludes with a review of policy aspects.

/pdf/much-ado-about-nothing-do-domestic-firms-really-benefit-from-77tms2nlmt.pdf

Much ado about nothing? do domestic firms really benefit from foreign direct investment?

On the Determinants of Foreign Direct Investment to Developing Countries: Is Africa Different?

This article surveys the latest developments in the literature on the impact of inward foreign direct investment (FDI) on growth in developing countries. In general, FDI is thought of as a composite bundle of capital stocks, know‐how, and technology, and hence its impact on growth is expected to be manifold and vary a great deal between technologically advanced and developing countries. The ultimate impact of FDI on output growth in the recipient economy depends on the scope for efficiency spillovers to domestic firms, by which FDI leads to increasing returns in domestic production, and increases in the value‐added content of FDI‐related production.

Foreign direct investment in developing countries and growth: A selective survey

Anecdotal evidence relates corruption with high levels of military spending. This paper tests empirically whether such a relationship exists. The empirical analysis is based on data from four different sources for up to 120 countries in the period 1985-98, The association between military spending and corruption is ascertained by using panel regression techniques. The results suggest that corruption is indeed associated with higher military spending as a share of both GDP and total government spending, as well as with arms procurement in relation to GDP and total government spending. This evidence indicates that defense spending can be considered for constructing governance indicators.

Corruption and Military Spending

Fiscal decentralization and intergovernmental fiscal relations: A cross-country analysis

Corruption and military spending

Using data for a sample of developing and transition countries, this paper estimates the relationship between government spending on health care and education, and social indicators. Unlike previous studies, where social indicators are used as proxies for the unobservable health and education status of the population, this paper estimates a latent variable model. The findings suggest that public social spending is an important determinant of social indicators, particularly in the education sector. Overall, the latent variable approach was found to yield more adequate estimates of social production functions, with larger elasticities of social indicators with respect to income and spending on education than the traditional approach, providing stronger evidence that increases in public spending have a positive impact on social indicators. The study also finds that the millennium goal of universal primary education enrollment by 2015 could be achieved through an increase by one-third, on average, in education spending.

Luiz R. de Mello

Papers

Foreign direct investment in developing countries and growth: A selective survey

Corruption and Military Spending

Fiscal decentralization and intergovernmental fiscal relations: A cross-country analysis

Corruption and military spending

More on the Effectiveness of Public Spending on Health Care and Education: A Covariance Structure Model