| Abstract: |
In this paper we distinguish different "qualities" of FDI to re-examine the
relationshipbetween FDI and growth. We use 'quality' to mean the effect of a
unit of FDI on economicgrowth. However this is difficult to establish because
it is a function of many differentcountry and project characteristics which
are often hard to measure Hence, we differentiate"quality FDI" in several
different ways. First, we look at the possibility that the effects of
FDIdiffer by sector. Second, we differentiate FDI based on objective
qualitative industrycharacteristics including the average skill intensity and
reliance on external capital. Third, weuse a new dataset on industry-level
targeting to analyze quality FDI based on the subjectivepreferences expressed
by the receiving countries themselves. Finally, we use a two-stage
leastsquares methodology to control for measurement error and endogeneity.
Exploiting a newcomprehensive industry level data set of 29 countries between
1985 and 2000, we find thatthe growth effects of FDI increase when we account
for the quality of FDI. |