The Importance of Social Factors When Assessing the Impact of Foreign Direct Investment on Economic Growth

38 Pages Posted: 25 Sep 2006

See all articles by Jonathan A. Batten

Jonathan A. Batten

RMIT University

Xuan Vinh Vo

University of Economics Ho Chi Minh City; French-Vietnamese Center for Management Education (CFVG) in Ho Chi Minh City

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Abstract

Employing a panel data modelling technique, we provide the answers to two critical research questions: what is the linkage between FDI and economic growth and does this relationship change under different legal, institutional, educational and economic conditions? Overall the analysis supports the view that FDI has a stronger positive impact on economic growth in countries with a higher level of education attainment, openness to international trade and stock market development, and a lower rate of population growth and lower level of risk. Thus countries undertaking reform of cross-border capital restrictions and controls and other policy aimed at encouraging domestic and foreign investment need to incorporate broader social policy objectives - such as education, legal and institutional reform - to maximise the benefits from FDI.

Keywords: foreign direct investment, economic growth, panel data, social policy

JEL Classification: F3, F4, F16

Suggested Citation

Batten, Jonathan A. and Vo, Xuan Vinh, The Importance of Social Factors When Assessing the Impact of Foreign Direct Investment on Economic Growth. Available at SSRN: https://ssrn.com/abstract=932182 or http://dx.doi.org/10.2139/ssrn.932182

Jonathan A. Batten

RMIT University ( email )

Level 12, 239 Bourke Street
Melbourne, Victoria
Australia

HOME PAGE: http://https://www.rmit.edu.au/contact/staff-contacts/academic-staff/b/batten-professor-jonathan

Xuan Vinh Vo (Contact Author)

University of Economics Ho Chi Minh City ( email )

Ho Chi Minh City, Ho Chi Minh City
Vietnam

HOME PAGE: http://www.ueh.edu.vn

French-Vietnamese Center for Management Education (CFVG) in Ho Chi Minh City

91 Ba Thang Hai Street
District 10
Ho Chi Minh City
Vietnam

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