Abstract
In a dynamic where international economic integration is constantly growing, multinational enterprises are important to understand the mechanisms that may induce productivity growth. Foreign Direct Investment (FDI) is a response of multinational enterprises to take advantage of a foreign country’s economic structure. Using a panel analysis, this study aims to enhance and improve the evidence of the effects of FDI on the productivity of Latin American countries, within an economic approach. The positive relationship between the variables of interest suggests that an increase in FDI inflows would impact the productivity growth of the analysed countries at a fairly high rate. This rate is understandable considering that Latin American economies are characterized by being highly susceptible to radical changes in their respective performances when they have greater access to productive factors; in this case, capital inflows can affect significantly the performance of the countries in this study.
Highlights
The economic conditions and institutions play an important role to understand the structure of a country’s economy
The main objective of this paper is to identify the magnitude of the effects of Foreign Direct Investment (FDI) on the productivity of Latin American countries
This study aims to quantify the effects of FDI on Total Factor Productivity (TFP) for Latin American countries in the past two decades
Summary
The economic conditions and institutions play an important role to understand the structure of a country’s economy. In the age of international competition, these conditions and institutions are highly related to economic development. Productivity growth is understood as one of the most important factors that may induce a positive change on these conditions and institutions in order to get economic competitive advantage. Productivity growth can be explained as a consequence of international economic integration. The change in productivity can be understood as one of the most important factors in the nations’ economic development. This change in productivity can be explained by international economic integration, assuming that this integration is theoretically unstoppable and constantly increasing. The Foreign Direct Investment represents a huge part of this international economic integration
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