Foreign direct investment and economic development:an interactive relationship

With the increasing importance of Foreign Direct Investment (FDI), there have been substantial studies on this issue, both empirically and theoretically. However, most existing studies focus on either the impacts of FDI presence or the determinants of FDI inflows, ignoring the fact that inward FDI and economic development may simultaneously affect each other. This thesis sets out to examine the interactive effects between FDI and economic development. The whole thesis is composed of five chapters. Chapter One is an overall introduction to the thesis. Chapter Two presents a theoretical study and chapter Two and Three provide two empirical studies. Chapter Five concludes. Chapter Two presents a theoretical two-sector model that features the importance of human capital in attracting foreign investment. This model theoretically explains why FDI is more likely to occur among countries that are similar in terms of human capital and technology. On the other hand, MNCs must train local employees to work with firm-specific technology and hence improve the technological skills of local workers. In Chapter Two, an empirical model is constructed to detect whether the productivities of foreign and local firms impact each other. The model is tested on China’s data at the industry level. The results indicate that productivity growth of local and foreign firms are jointly determined. Evidence also suggests that the extent to which spillovers occur varies with difference technology levels of local firms. Chapter Four investigates the relationship between FDI and economic grown based on a panel of data for 84 countries over the period 1970-1999. Both equations of FDI inflow and GDP growth are examined. The results indicate that FDI not only directly promotes economic growth by itself, but also indirectly does so via its interaction terms. There is a strong positive interaction effect of FDI with human capital and a strong negative interaction effect of FDI with technology gap on economic growth in developing countries.

An appraisal of employment problems and policies at the micro-economic level

This study has concentrated on the development of an impact simulation model for use at the sub-national level. The necessity for the development of this model was demonstrated by the growth of local economic initiatives during the 1970's, and the lack of monitoring and evaluation exercise to assess their success and cost-effectiveness. The first stage of research involved the confirmation that the potential for micro-economic and spatial initiatives existed. This was done by identifying the existence of involuntary structural unemployment. The second stage examined the range of employment policy options from the macroeconomic, micro-economic and spatial perspectives, and focused on the need for evaluation of those policies. The need for spatial impact evaluation exercise in respect of other exogenous shocks, and structural changes was also recognised. The final stage involved the investigation of current techniques of evaluation and their adaptation for the purpose in hand. This led to a recognition of a gap in the armoury of techniques. The employment-dependency model has been developed to fill that gap, providing a low-budget model, capable of implementation at the small area level and generating a vast array of industrially disaggregate data, in terms of employment, employment-income, profits, value-added and gross income, related to levels of United Kingdom final demand. Thus providing scope for a variety of impact simulation exercises.

Local economic development initiatives and the transition from training and enterprise councils to new institutional structures in England

Current British government economic development policy emphasises regional and sub-regional scale, multi-agent initiatives that form part of national frameworks to encourage a 'bottom up' approach to economic development. An emphasis on local multi-agent initiatives was also the mission of Training and Enterprise Councils (TECs). Using new survey evidence this article tracks the progress of a number of initiatives established under the TECs, using the TEC Discretionary Fund as an example. It assesses the ability of successor bodies to be more effective in promoting local economic development. Survey evidence is used to confirm that many projects previously set up by the TECs continue to operate successfully under new partnership arrangements. However as new structures have developed, and policy has become more centralized, it is less likely that similar local initiatives will be developed in future. There is evidence to suggest that with the end of the TECs a gap has emerged in the institutional infrastructure for local economic development, particularly with regard to workforce development. Much will depend in future on how the Regional Development Agencies deploy their growing power and resources.