FDI INFLOW SPILLOVER EFFECT IMPLICATIONS ON THE ASIA PACIFIC PRODUCTIVITY GROWTH THROUGH THE EXPORT CHANNEL

Abstract

This paper inspects the influence of Foreign Direct Investment (FDI) inflows onthe catching up process developed by labour, physical capital, human capital, absorptivecapacity, telecommunications investment, and export channel on Asia Pacific's sustainableproductivity growth. A panel data from the period of 1970 to 2012 was used. The modifiedextensive growth theory model that is based on output approach was applied. Bothgrowth accounting and econometric approaches were considered to estimating theparameters of variables in first step and in the second step productivity indicators werecalculated. The results show that the FDI inflows and inputs used are input driven thatwas generally more predominant than total factor productivity (TFP) growth. Meanwhile,The GDP grew significantly during the periods of the study by development of humancapital, export, and telecommunications investment (input driven) variables, whichsupported by FDI inflows. Accordingly, the impact of export channel on the TFP growthfound to be positive with insignificant contribution in most the group selected countries.