Sectoral Analysis of Foreign Investment and Growth In the Developed Countries

Empirical studies on FDI and growth in developed countries have yielded conflicting results using cross-country regressions. We use sectoral data for a group of six country members of the Organization for Economic Cooperation and Development. Our paper is the first to identify the sector-specific impact of FDI on growth in the developed countries. Our results show that FDI might have positive or negative effect on economic growth operating directly and through its interaction with labor. Moreover, we find the effects seem to be very different across countries and economic sectors.