This research investigates the impact of trade openness and foreign direct investment (FDI) on economic growth. Using a framework proposed by Barro (1991), panel data regression analysis is performed on 5-year time periods between 1985 and 2005. A sample of 89 countries is analyzed using data collected from the World Development Indicators (WDI), Penn World Table, Barro and Lee (2010), and Polity IV Project datasets. The empirical analysis shows that conditional convergence occurs among the countries in the sample and that FDI net inflows per worker slightly increases the speed of conditional convergence. This study also finds evidence that FDI has significant effects on economic growth. While international trade does not significantly influence economic growth, human capital does. The presence of a democratic government also brings positive effects to growth in real GDP per capita.
Recommended CitationHak, Donna Chan Wah, "Do Foreign Direct Investment and Trade Openness Accelerate Economic Growth?" (2011). Honors Projects in Economics. Paper 12.