with Randolph Bruno
February 2011
How effective is foreign direct investment in supporting economic performance
in low-income countries?
This paper assesses this question using meta-regression-analysis techniques
on a set of 550 and 554
estimates of the impact of FDI on economic performance from 103 micro-
and 72 macro-studies, respectively.
Our results suggest that (a) the estimated effects tend to be larger in
the macro/country than in the micro/firm
studies, (b) the effect is significantly greater in low- than in middle-income
countries, and (c) econometric
method and specification choice seem central to understand the observed
variation in the estimates. The
paradox this study raises is how to reconcile the main lesson from the
literature (that the effect emerges
only for countries that have reached certain thresholds, mainly with respect
to human capital and financial
development) with the finding that the effects are larger for counties
that are typically far from reaching such
critical thresholds. We argue that considerations of the gap between private
and social returns, albeit
missing in most of the current academic and policy discussions, may provide
the key.