The Positive Causal Impact of Foreign Direct Investment on Productivity: A Not So Typical Relationship

Abstract

Previous research has argued that foreign direct investment (FDI) exerts a positive and causal impact on the productivity of the recipient countries. However, we find that there is little macroeconomic evidence that FDI fosters productivity growth in recipient countries, including in those with high absorptive capacity, once we use an instrumental variables (IV) estimator robust to outliers.Foreign Direct Investment, Productivity, Robust Regression.