Abstract
This paper first discusses the channels through which inward FDI could impact the key drivers of aggregate labour productivity in the host country. Next, it reviews the available empirical evidence on FDI impacts in the host economy. It concludes that the available empirical evidence is not very useful for serious policy analysis because each of the available research papers looks at only one or two of the inward FDI economic impacts in isolation and do not provide a full picture, and they use different data sets and apply different econometric techniques. Finally, the paper proposes a system approach for estimating the general equilibrium economic impacts of inward FDI in the host country. Towards this goal, it outlines a small macro-econometric model of ten equations for key economic variables in the host country, to be estimated as a system, taking into account interdependencies between them.
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