In this paper, we assess whether attracting higher amounts of FDI induces a greater level of economic complexity in a country. Using a panel of 117 countries and 22 years, from 1995 to 2016, we test for the causal relationship between inward FDI and economic complexity using a panel VAR approach and Impulse Response Functions. We find that accumulating a higher stock of inward FDI per capita Granger- causes a greater economic complexity in a country, and not vice versa. This causal effect is very small, however, and occurs only in countries with above-average levels of GDP per capita, tertiary education, tertiarization or financial development. We also find that only greenfield FDIs Granger-cause economic complexity in developed countries. Finally, knowledge-intensive greenfield projects are the only type of FDI that Granger-cause complexity in a less developed country, but the estimated effect is near zero and disappears after two years.

From FDI to economic complexity: a panel Granger causality analysis

Chiara Franco
2021

Abstract

In this paper, we assess whether attracting higher amounts of FDI induces a greater level of economic complexity in a country. Using a panel of 117 countries and 22 years, from 1995 to 2016, we test for the causal relationship between inward FDI and economic complexity using a panel VAR approach and Impulse Response Functions. We find that accumulating a higher stock of inward FDI per capita Granger- causes a greater economic complexity in a country, and not vice versa. This causal effect is very small, however, and occurs only in countries with above-average levels of GDP per capita, tertiary education, tertiarization or financial development. We also find that only greenfield FDIs Granger-cause economic complexity in developed countries. Finally, knowledge-intensive greenfield projects are the only type of FDI that Granger-cause complexity in a less developed country, but the estimated effect is near zero and disappears after two years.
Antonietti, Roberto; Franco, Chiara
File in questo prodotto:
Non ci sono file associati a questo prodotto.

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11568/1072418
 Attenzione

Attenzione! I dati visualizzati non sono stati sottoposti a validazione da parte dell'ateneo

Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 12
  • ???jsp.display-item.citation.isi??? 7
social impact