Growth effects of foreign and domestic investment

Glenn A. Firebaugh

Research output: Contribution to journalArticle

156 Scopus citations

Abstract

Over the past few years, numerous studies in sociology have concluded that foreign investment harms poor nations. These studies have focused on the coefficient for foreign capital stock, controlling for "flow ' (new investment), and - defying logic - have inferred that a negative coefficient for stock reflects "dependency effects' that retard economic growth. Since capital stock is the denominator for investment rate, the greater the stock, the lower the investment rate, for a given level of new investment. Hence, the negative coefficient for capital stock found in dependency studies indicates a beneficial investment effect, not a harmful effect. This point is demonstrated by reanalysis of the data used in dependency studies. In these data, foreign investment spurs growth. Earlier analysts have concluded otherwise only because their conclusions have belied their findings. -Author

Original languageEnglish (US)
Pages (from-to)105-130
Number of pages26
JournalAmerican Journal of Sociology
Volume98
Issue number1
DOIs
StatePublished - Jan 1 1992

All Science Journal Classification (ASJC) codes

  • Sociology and Political Science

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