Local conditions and economic growth from South–South FDI

Abstract

ABSTRACTThis paper examines growth in Southern economies arising from FDI from both Southern and Northern economies. We explore local conditions that are necessary for growth. A system GMM estimator is used to distinguish between South–South and North–South FDI flows. The highly skilled labour and strong property rights protection required to achieve growth from Northern FDI are not necessary local conditions for achieving growth from Southern FDI. It is strong law and order that emerges as a critical necessary condition associated with positive growth following Southern FDI. The results indicate a distinctive impact of local conditions in activating growth from FDI.