The Determinants and Growth Effects of Foreign Direct Investment: A Comparative Study

This study examines the impact of foreign direct investment (FDI) on economic growth using panel data from 84 countries between 2010 and 2019. We utilized a two-step system generalized method of moments (GMM) to analyze how FDI affects economic growth through productivity gains and the role of economic freedom in attracting FDI. The findings suggest that FDI has a positive impact on productivity and benefits both OECD and non-OECD countries. Economic freedom plays a significant role in attracting FDI, particularly in OECD countries, and contributes to economic growth in non-OECD countries. However, economic freedom alone does not guarantee strong economic growth in OECD countries, but it significantly enhances growth in non-OECD countries. The results also highlight that only economies with robust economic infrastructure and development levels benefit more from FDI.