The Impact Of The US And Chinese OFDI On Economic Growth In Developing Countries;A Comparative Analysis

In recent years,foreign direct investment has brought many positive implications for both developed and developing countries.This financial integration in the form of foreign capital inflow has attracted much interest to policymakers and academia as they try to investigate possible implications of FDI on the host countries‘ economic growth.The importance of foreign direct investment can be perceived as transferring of technology,employment creation,and knowhow spillover,among other effects.Equally,FDI benefits domestic production and investment through the backward and forward linkages.Although developed and developing countries have different levels of FDI flow,there is still a wide debate on its implications on local and international levels.Contrasting findings on FDI‘s impact on host economies,regardless of whether positive or negative are controversial base on policymakers and researchers point of view.This is more so especially in the recent past,when China has emerged as an alternative source of FDI departing from the traditional sources like U.S and other developed economies.This study sought to compare China as a new source of FDI with U.S FDI in developing countries.The study attempts to investigate the effect of outward direct investments(OFDI)from the US and that from China,with the aim of establishing whether their impact has been a positive,negative,or neutral,on the economic growth of middle-income developing countries.Therefore,this study applied Least Square Dummy Variable(LSDV)model from 2003 to 2012 on the broad datasets of 23 middle-income developing countries(Asia Africa,Latin America,and the Caribbean)to probe into the impact of OFDI from US and China on the economic growth of these countries.Specifically,this thesis compares the effect of the US-OFDI and Chinese-OFD on economic growth.The study also shows that there is a change effect of US-OFDI and Chinese OFDI on economic growth in developing countries when the theoretical paradigm is changed.The findings of this study are based on the neoclassical growth model framework in which the study did not find significant evidence to report the impact of the US and China‘s outward direct investment on the economic growth of developing countries.On the other hand,the study also sought to examine the impact of US and China‘s outward direct investment on the mentioned countries in the theoretical framework of the endogenous growth model.The results of the analysis show that there is significant evidence that outward direct investment from the US and China positively contributes to the economic growth of the developing country.However,the results highlight that the impact in the case of the US-OFDI is greater than that of China.The results changed when examining the impact of both OFDIs in the context of neoclassical and endogenous growth models,i.e.,the magnitude bears different values while the signs are the same.The thesis is divided into eight chapters.Chapter one to five describes the introduction,literature review,overview of the US,and China‘s outward direct investment to developing countries,the theoretical framework of the study,methodology & data in that order.Chapter six to seven showed the analysis of the impact of US outward direct investment on the economic growth of middle-income developing countries,Chinese‘s OFDI on economic growth.Chapter eight presents the results of the analysis of the US and Chinese OFDI on economic growth.