سرمایه گذاری، گشودگی تجارت و سرمایه گذاری مستقیم خارجی: مسائل مربوط به قابلیت های اجتماعی
|کد مقاله||سال انتشار||مقاله انگلیسی||ترجمه فارسی||تعداد کلمات|
|9718||2013||14 صفحه PDF||سفارش دهید||10038 کلمه|
Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : International Review of Economics & Finance, Volume 26, April 2013, Pages 56–69
This paper investigates whether the impacts of trade and foreign direct investment (FDI) on domestic investment depend upon social capability of a country. Applying the instrumental variable threshold regressions approach to cross-sectional data for 85 countries, it finds that social capability such as human capital, financial development, and political institutions defines the impacts of trade and FDI on domestic investment. Particularly, trade adversely affects investment in low-human-capital, less-financially-developed, or more-corrupted countries, but positively affects it in countries with opposite attributes. In contrast, FDI has a positive effect on investment in countries with low human capital, less-developed financial sectors, or high corruption, but a negative impact in countries with opposite attributes.
Trade and foreign direct investment (FDI) are considered as important openness strategies in promoting economic growth, especially for developing countries, despite that the exact relationships of growth with trade and FDI are yet far from being incontrovertible. This paper attempts to change the direction of the debate by focusing on the impacts of trade and FDI on domestic investment, instead of economic growth. The emphasis on domestic investment is motivated by three observations. First, investment is an essential element of aggregate demand and fluctuations in investment have substantial effects on economic activities and long-term economic growth. Second, the extent to which FDI enhances economic growth depends upon the degree of complementarity and substitutability between FDI and domestic investment. As claimed by de Mello (1999), some degree of complementarity is required for FDI to contribute to economic growth. Third, a question as to whether trade's contribution to economic growth and development works through physical capital accumulation or productivity growth remains unsolved. Therefore, identifying the role of trade and FDI in domestic investment helps clarify the influence of globalization on the growth process, and hence shape relevant policies and institutional reforms. The literature on FDI and domestic investment suggests that FDI may crowd in domestic investment by providing scarce capital and hence relaxing firms’ financial constraints (Stiglitz, 2001), by increasing productivity through externalities and spillovers of managerial and technological know-how (Borensztein et al., 1998 and de Mello, 1999), and by creating a demonstration effect on the direction of investment (Wen, 2007). However, FDI may displace domestic investment if multinational firms borrow heavily from domestic credit markets and compete for limited investment opportunities in the host countries (Feldstein, 2000), if new technologies embodied in FDI accelerate technological obsolescence of traditional technologies (Young, 1993), or if policies offering preferential tax treatment and other incentives to induce FDI inflows introduce significant distortions between the returns to foreign and domestic capital (Easterly, 1993).1 Meanwhile, the literature on trade liberalization suggests that the liberalization fosters domestic investment by allowing domestic agents to import relatively cheaper and more efficient capital goods, thereby removing structural constraints on investment and increasing efficiency of capital accumulation (Baldwin and Seghezza, 1996 and Lee, 1995). Openness to trade also stimulates domestic investment by encouraging competition in domestic and international markets and generating higher returns on investment through economies of scale (Eicher, 1999, Lee, 1993 and Young, 1991). But opposing arguments are not hard to build. If market or institutional imperfection exists, trade openness can lead to under-utilization of human and capital resources, concentration in extractive economic activities, or specialization away from technologically advanced, increasing-return sectors.2 Inconclusive results might indicate that trade and FDI are not among the primary determinants of domestic investment. Another possibility, however, is that trade (FDI) might have a nonlinear or even non-monotonic impact on domestic investment. A large macro literature finds evidence of an exogenous positive effect of trade (FDI) on economic growth only when the economies have reached certain threshold of social capability (Abramovitz, 1986),3 either because of the technological constraints or because certain complementary reforms of institutions and appropriate macroeconomic management are prerequisite for a country to benefit from openness. In terms of trade, for example, Dowrick and Golley (2004) and Kim and Lin (2009) emphasize real GDP per capita, Bhattacharyya, Dowrick, and Golley (2009) focus on institutional development, Borrmann, Busse, and Neuhaus (2006) and Freund and Bolaky (2008) highlight labor market flexibility and government regulation, respectively, while Chang, Kaltani, and Loayza (2009) provide evidence of policy and institutions in defining the link between trade and growth. Likewise, several cross-country studies conclude that FDI leads to economic growth only when host countries have sufficient levels of human capital (Borensztein et al., 1998, Wang and Wong, 2009 and Xu, 2000), per-capita income (Blomstrom, Lipsey, & Zejan, 1992), trade openness (Balasubramanyam, Salisu, & Sapsford, 1996), or domestic financial institutions (Alfaro et al., 2004, Alfaro et al., 2010 and Alfaro et al., 2009), among others. Along the same line, we investigate whether the link between domestic investment and trade (FDI) are regime specific, depending upon social capability of the local economy, with specific reference on human capital, financial development, and governance. The importance of human capital presumably relates to the ability of a highly skilled workforce to absorb and adopt new technology and knowledge embodied in foreign investment or imported capital goods (Abramovitz, 1986, Benhabib and Spiegel, 2005, Borensztein et al., 1998, Cohen and Levinthal, 1989, Kneller, 2005 and Kneller and Stevens, 2006). Well-developed financial markets are crucial to facilitating investments, by creating economies of scale for investors and allocating capital to its most productive use. Moreover, in Alfaro et al. (2004), well-developed financial markets can efficiently create backward-linkages between foreign firms and domestic firms in upstream industries in the host country. As a result, the existence of foreign firms will increase the domestic investment in upstream industries. Well-developed financial markets also enable domestic firms and entrepreneurs to capitalize with new multinationals (Alfaro et al., 2010). Better governance should get prices right by providing appropriate incentives for agents to invest in growth-enhancing innovations, as they can be assured that they will reap the reward of their effort. Corruption may also induce under-investment in public capital (Del Monte & Papagni, 2001). Additionally, unlike most of the previous studies that treat trade and FDI separately, we model trade and FDI in a regression exploring the effects of globalization on domestic investment. Since prior research indicates both positive and negative influences of FDI on trade (e.g., Aizenmam and Noy, 2006 and Blonigen, 2005), omitting trade or FDI variable makes it difficult to assess whether the significant relationship between domestic investment and trade (FDI) holds when controlling for FDI (trade), whether each has an independent impact on domestic investment, or whether overall openness matters for domestic investment but it is difficult to identify the separate impact of trade and FDI. This paper thus brings two strands of literature together, the one on the trade-investment link and the other on the FDI-investment nexus, and addresses how globalization determines domestic investment. More importantly, to evaluate whether the relationships of domestic investment with trade and FDI are regime specific, this paper uses the instrumental variable threshold regressions approach proposed by Caner and Hansen (2004). This methodology allows us to deal with the endogeneity of trade openness and FDI so as to concentrate on the causal effects of the exogenous components of international trade and FDI and uncover potential nonlinear threshold effects on the nexuses. And it does not split the sample of countries according to some predetermined rule, but allows the data to determine which regime a country belongs to. Moreover, the threshold methodology allows all parameters of the model to discretely differ across regimes, which is in contrast with the interaction methodology presupposing that the impact of openness is a smooth function of variables of interest.4 Based on a large cross-section of countries and using the national geographic instruments, this paper finds that, as an alternative mode of openness strategy, trade and FDI play different roles in determining domestic investment and their impacts on domestic investment are regime-specific. Particularly, trade is detrimental to domestic investment of countries with low human capital, less-developed financial system, or high corruption, but favorable to that of countries with high human capital, better financial sectors, or low corruption. Conversely, FDI has a positive effect on domestic investment in low-human-capital, less-financially-developed, or more-corrupted countries, but a negative impact in high-human-capital, well-financially-developed, or less-corrupt countries. The remainder of the paper is organized as follows. Section 2 illustrates the model specification and the estimation procedure of the instrumental variable threshold regressions approach, and describes the data used. Section 3 presents and analyzes the empirical results. And Section 4 concludes the paper.
نتیجه گیری انگلیسی
There is a large literature on the growth effect of globalization. However, less emphasis has been laid on the response of domestic investment. This paper directs attention to the effects of both trade and FDI on domestic investment. It employs the instrumental variable threshold regression approach of Caner and Hansen (2004) to investigate how social capability of a country shapes the relationships of domestic investment with trade and FDI openness while controlling for the potential endogeneity with geographic instruments. The empirical assessment of thresholds allows us to identify appropriate policy interventions for strengthening the growth-enhancing effect of openness through the investment channel. Our cross-country analysis encompassing a sample of 85 countries for the period of 1975 through 2010 suggests that trade and FDI have regime specific impacts. In particular, trade appears to have adverse effects on domestic investment in countries starting with low human capital, low financial development, or high corruption but positive effects in countries beginning with high human capital, better financial sectors, or low corruption. On the other hand, FDI is beneficial for domestic investment in countries starting with low human capital, less-developed financial system, or high corruption, but is detrimental to domestic investment in countries with the reverse attributes. On a policy perspective, our findings suggest that FDI is a more friendly openness mode for low-income countries that generally have low human capital, less-developed financial system, or high corruption. By contrast, trade is beneficial for high-income countries that tend to have high human capital, mature financial institutions, or low corruption.