Economic Openness and Growth in Developing Economies: The Role of Institutional Quality
DOI:
https://doi.org/10.61506/01.00461Keywords:
economic openness, growth, developing countriesAbstract
This study demonstrates that FDI is a proven growth determinant, and trade openness also influences the effectiveness of FDI on growth. This is evident because countries with good institutional environment attracted more benefits through FDI and increased trade openness (welfare). We tested the hypothesis with a sample of 70 developing nations between 1984 and 2021 using a linear interaction model. The GMM results indicate economic growth FDI influence and trade openness expands in tandem with institutional factors. High-institution quality countries should gain more from MNC presence, as they will have fewer problems absorbing and internalising new technologies.
References
Akuffo-Kwapong, B. N. A. (2023). The Effect of Neoliberal Economic Reforms on Urbanization: The Story of Thirty-Two African Countries (Master's thesis, Georgetown University).
Alfaro, L., Chanda, A., Kalemli-Ozcan, S., & Sayek, S. (2004). FDI and economic growth: the role of local financial markets. Journal of international economics, 64(1), 89-112. DOI: https://doi.org/10.1016/S0022-1996(03)00081-3
Ali, A. (2022). Foreign Debt, Financial Stability, Exchange Rate Volatility and Economic Growth in South Asian Countries. Journal of Business and Economic Options, 5(4), 26-34.
Anwar, S., & Nguyen, L. P. (2011). Foreign direct investment and export spillovers: Evidence from Vietnam. International Business Review, 20(2), 177-193. DOI: https://doi.org/10.1016/j.ibusrev.2010.11.002
Apergis, N. (2008). The Employment–Wage Relationship. American review of political economy, 6(1). DOI: https://doi.org/10.38024/arpe.100
Azman-Saini, W. N. W., Baharumshah, A. Z., & Law, S. H. (2010). Foreign direct investment, economic freedom and economic growth: International evidence. Economic modelling, 27(5), 1079-1089. DOI: https://doi.org/10.1016/j.econmod.2010.04.001
Balasubramanyam, V. N., Salisu, M., & Sapsford, D. (1996). Foreign direct investment and growth in EP and IS countries. The economic journal, 106(434), 92-105. DOI: https://doi.org/10.2307/2234933
Bengoa, M., & Sanchez-Robles, B. (2005). Does equality reduce growth? Some empirical evidence. Applied Economics Letters, 12(8), 479-483. DOI: https://doi.org/10.1080/13504850500120177
Bhandari, R., Saiardi, A., Ahmadibeni, Y., Snowman, A. M., Resnick, A. C., Kristiansen, T. Z., ... & Snyder, S. H. (2007). Protein pyrophosphorylation by inositol pyrophosphates is a posttranslational event. Proceedings of the National Academy of Sciences, 104(39), 15305-15310. DOI: https://doi.org/10.1073/pnas.0707338104
Blomström, M. (2002). The economics of international investment incentives. DOI: https://doi.org/10.1007/978-3-540-24736-4_3
Borensztein, E., De Gregorio, J., & Lee, J. W. (1998). How does foreign direct investment affect economic growth?. Journal of international Economics, 45(1), 115-135. DOI: https://doi.org/10.1016/S0022-1996(97)00033-0
Campos, N. F., & Kinoshita, Y. (2002). Foreign direct investment as technology transferred: Some panel evidence from the transition economies. The Manchester School, 70(3), 398-419. DOI: https://doi.org/10.1111/1467-9957.00309
Chowdhury, A., & Mavrotas, G. (2006). FDI and growth: what causes what?. World economy, 29(1), 9-19. DOI: https://doi.org/10.1111/j.1467-9701.2006.00755.x
De Gregorio, J. (1992). Economic growth in latin america. Journal of development economics, 39(1), 59-84. DOI: https://doi.org/10.1016/0304-3878(92)90057-G
De Mello Jr, L. R. (1997). Foreign direct investment in developing countries and growth: A selective survey. The journal of development studies, 34(1), 1-34. DOI: https://doi.org/10.1080/00220389708422501
Dunning, J. H. (1993). Internationalizing Porter's diamond. MIR: Management International Review, 7-15.
Durham, J. B. (2004). Absorptive capacity and the effects of foreign direct investment and equity foreign portfolio investment on economic growth. European economic review, 48(2), 285-306. DOI: https://doi.org/10.1016/S0014-2921(02)00264-7
Durlauf, S. N. (2020). Institutions, Development, and Growth. J.-M. BA-LAND ET AL.(a cura di), The Handbook of Economic Development and Institutions, Princeton, 189. DOI: https://doi.org/10.2307/j.ctvm7bbxr.10
Falki, N. (2009). Impact of foreign direct investment on economic growth in Pakistan. International Review of Business Research Papers, 5(5): 110-120.
Hermes, N., & Lensink, R. (2003). Foreign direct investment, financial development and economic growth. The journal of development studies, 40(1), 142-163. DOI: https://doi.org/10.1080/00220380412331293707
Hsiao, F. S., & Hsiao, M. C. W. (2006). FDI, exports, and GDP in East and Southeast Asia—Panel data versus time-series causality analyses. Journal of Asian Economics, 17(6), 1082-1106. DOI: https://doi.org/10.1016/j.asieco.2006.09.011
Karimi, M. S., & Yusop, Z. (2009). FDI and economic growth in Malaysia.
Khawar, M. (2005). Foreign direct investment and economic growth: A cross-country analysis. Global Economy Journal, 5(1), 1850034. DOI: https://doi.org/10.2202/1524-5861.1057
Musa, J. J. (2010). Nigeria’s rural economic development strategy: Community Driven Development Approach.
Nasir, Z. M. (2022). Macroeconomic Factors Shaping Foreign Direct Investment Inflows: Evidence from Pakistan. Journal of Business and Economic Options, 5(2), 29-35.
Omri, A. (2014). An international literature survey on energy-economic growth nexus: Evidence from country-specific studies. Renewable and Sustainable Energy Reviews, 38, 951-959. DOI: https://doi.org/10.1016/j.rser.2014.07.084
Rado, R., Andrianarisoa, B., Ravelomanantsoa, S., Rakotoarimanga, N., Rahetlah, V., Fienena, F. R., & Andriambeloson, O. (2015). Biocontrol of potato wilt by selective rhizospheric and endophytic bacteria associated with potato plant. African Journal of Food, Agriculture, Nutrition and Development, 15(1), 9762-9776. DOI: https://doi.org/10.18697/ajfand.68.15005
Sabra, M. (2022). Unraveling the Impact of Foreign Aid on Economic Dynamics: Evidence from Palestine. Journal of Business and Economic Options, 5(3), 9-19.
Sadashiv, K. R. (2023). Foreign Direct Investment Dynamics and Economic Growth in the Case of India. Journal of Business and Economic Options, 6(1), 45-52.
Sala-i-Martin, X. (2002). The world distribution of income (estimated from individual country distributions). DOI: https://doi.org/10.3386/w8933
Sala-i-Martin, X. X., & Barro, R. J. (1995). Technological diffusion, convergence, and growth (No. 735). Center discussion paper.
Wang, J. Y., & Blomström, M. (1992). Foreign investment and technology transfer: A simple model. European economic review, 36(1), 137-155. DOI: https://doi.org/10.1016/0014-2921(92)90021-N
Wang, S. J., Liu, Q. M., & Zhang, D. F. (2004). Karst rocky desertification in southwestern China: geomorphology, landuse, impact and rehabilitation. Land degradation & development, 15(2), 115-121. DOI: https://doi.org/10.1002/ldr.592
Yao, Y. Y. (2006). Neighborhood systems and approximate retrieval. Information Sciences, 176(23), 3431-3452. DOI: https://doi.org/10.1016/j.ins.2006.02.002
