Foreign Direct Investment and Total Factor Productivity: Is There Any Resource Curse?

Abstract

We examine the effects of an important technology diffusion channel-foreign direct investment (FDI)-on the growth of total factor productivity (TFP) and the role played by natural resources in this relationship. Based on cross-sectional data from 71 developing countries, we found that the net effect of FDI on TFP growth decreases with rents provided by natural resources. This result highlights the phenomenon of the natural resource curse applied to foreign direct investment and the non-linearity of the effect of FDI on the TFP growth.