Impact of FDI on provincial economic growth in Vietnam

Abstract

The impact of foreign direct imvestment (FDI) on economic growth is still a highly controversial issue as remarked by many researchers (Aitken et al.; 1997; Carkovic & Levine, 2002; Bende-Nabende et al., 2003; Durham, 2004; and Hsiao, 2006). Using a panel dataset of 43 provinces in Vietnam during 1997 – 2012 and the Granger causality test by Arellano-Bond GMM and PMG estimation, this paper shows that: (i) FDI does Granger-cause private investment, human resources, taxation, infrastructure, trade openness and local technology; (ii) FDI has a positive impacts on provincial economic growth in the long term; and (iii) FDI flows vary over provinces due to differences in geographical conditions and level of development.