The Role of Foreign Direct Investment in the Rise of Emerging Economies
Author Details: Mohamad ABOU EL HASSAN-Bucharest University of Economic Studies, Bucharest, Romania
Abstract
Rising foreign direct investments (FDI) is considered as strong evidence of globalization. FDI plays a very important role in all countries, especially for developing economies, which are considered to be the engine of economic growth and development. The present paper analyses the role of FDI on emerging economies based on reviewing previous research in this domain. The first part of the article presents the characteristics of developed, developing and emerging economies and a characterization of FDI in terms of determinants and benefits. The second part includes a review on previous theories regarding the impact of FDI on economic growth, evaluating the impact of FDI on economic growth in emerging economies and the relationship between FDI and wage level. The main findings show that FDI plays a particularly important role in all the quantitative factors of economic growth and the contribution to economic growth is amplified by the positive interaction with human capital and sound macroeconomic policies and institutional stability. Most studies indicate a beneficial impact of FDI on the growth of host countries and the positive effects of FDI on salaries and job creation. However, some researchers claim that foreign investors tend to discourages wage growth in local firms.
Keywords: Foreign direct investment, FDI, emerging countries, developed countries, developing countries, economic growth.
Rising foreign direct investments (FDI) is considered as strong evidence of globalization. FDI plays a very important role in all countries, especially for developing economies, which are considered to be the engine of economic growth and development. The present paper analyses the role of FDI on emerging economies based on reviewing previous research in this domain. The first part of the article presents the characteristics of developed, developing and emerging economies and a characterization of FDI in terms of determinants and benefits. The second part includes a review on previous theories regarding the impact of FDI on economic growth, evaluating the impact of FDI on economic growth in emerging economies and the relationship between FDI and wage level. The main findings show that FDI plays a particularly important role in all the quantitative factors of economic growth and the contribution to economic growth is amplified by the positive interaction with human capital and sound macroeconomic policies and institutional stability. Most studies indicate a beneficial impact of FDI on the growth of host countries and the positive effects of FDI on salaries and job creation. However, some researchers claim that foreign investors tend to discourages wage growth in local firms.
Keywords: Foreign direct investment, FDI, emerging countries, developed countries, developing countries, economic growth.
