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Empirical Economics

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01.06.2015

Information and communication technology and foreign direct investment: interactions and contributions to economic growth

verfasst von: Elena Ketteni, Constantina Kottaridi, Theofanis P. Mamuneas

Erschienen in: Empirical Economics | Ausgabe 4/2015

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Abstract

This study explores the joint effect of FDI and domestic capital stocks (ICT and non-ICT) on productivity and economic growth, by incorporating two additions to the recent literature. Firstly, biases due to the fact that the observed measures of domestic capital stocks have an FDI component (double counting) are taken into account, and secondly, the possibility that the effect may be heterogeneous. Using semiparametric econometric techniques, the output elasticities for 15 OECD countries for the period 1980–2004 are estimated. The results indicate that biases do exist and they are significant. When corrected, the effects of all three types of capital are positive, significant, and they vary across countries and time. Furthermore, there exist interactions between the three capital variables, implying a complimentary relationship between domestic (ICT and non-ICT) and FDI capital. Additionally, the rates of return to FDI are high and heterogeneous, suggesting that in most countries, there is need for more investment.

Vorheriger Artikel An international comparison of productivity change in the textile and clothing industry: a bootstrapped Malmquist index approach

Nächster Artikel Income inequality and economic growth: a panel VAR approach

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In all specifications estimated, we append an error term. The error term is normally distributed with zero mean and constant variance.

For a detailed description of the data see Pilat and Achreyer (2004) and Ketteni et al. (2007).

Data are nonexistent regarding the sectoral distribution of FDI. OECD provides a sectoral distribution, nevertheless data are only available for ICT sectors (which are not directly comparable with ours) only for recent years, i.e., after 2000–2002.

The share $s$ differs across countries and time. On average, these shares (in total physical capital) are 0.89 and 0.11 for non-ICT and ICT capital, respectively.

Given, constant returns to scale, OLS estimates of a production function in labor productivity form are free of simultaneity equation bias providing consistent estimates (see Mundlak 1996). In this case, any omitted variable issue (such as human capital) becomes a measurement issue in our dependent variable which does not alter the consistency of our estimates since it is included in the error and the $\hat{A}$ term.

Dummies are included in our analysis and testing for their joint significance cannot be rejected.

Two other specifications have also be estimated. In particular we have estimated

$$\begin{aligned} \hat{Y}&= \hat{A}+\theta _{L}\hat{L}+\theta _{P}\hat{P}^{*}+\theta _{I} \hat{I}^{*}+\theta _{F}\hat{F}\\ \hat{Y}-\hat{F}&= \hat{A}^{*}+\theta _{L}(\hat{L}-\hat{F})+\theta _{P}( \hat{P}^{*}-\hat{F})+\theta _{I}(\hat{I}^{*}-\hat{F}). \end{aligned}$$

Details are available upon request.

The rates of return to the three types of capital are calculated by $\rho _{x}=(\varepsilon _{x}\frac{Y}{X})/q_{x,}(x=P,I,F)$, where $\varepsilon _{x}$ is the output elasticity and $q_{x}$ is the investment price deflator.

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Titel: Information and communication technology and foreign direct investment: interactions and contributions to economic growth
verfasst von: Elena Ketteni
Constantina Kottaridi
Theofanis P. Mamuneas
Publikationsdatum: 01.06.2015
Verlag: Springer Berlin Heidelberg
Erschienen in: Empirical Economics / Ausgabe 4/2015
Print ISSN: 0377-7332
Elektronische ISSN: 1435-8921
DOI: https://doi.org/10.1007/s00181-014-0839-1

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