Three empirical essays on foreign direct investment, research and development, and insurance

This dissertation consists of three independent essays, all of which are empirical treatments<br/>of different determinants of economic growth.<br/><br/>The first essay, which is in Chapter 2, evaluates the role economic freedom plays<br/>in mediating the effect of foreign direct investment (FDI) on growth. It tests whether<br/>countries with sufficiently high level of economic freedom can exploit FDI more efficiently. It<br/>uses cross-country observations from 84 countries for the 1976-2005 period. It applies a<br/>threshold regression which is flexible enough to accommodate the possibility that the<br/>impact of FDI on growth ‘kicks in’ only when the level of economic freedom exceeds some<br/>unknown threshold. The results show that FDI has no direct (linear) effect on output growth.<br/>Instead, its impact is conditional on the level of economic freedom in the host countries.<br/>Only countries whose level of economic freedom has exceeded the threshold level of<br/>economic freedom benefited from FDI inflows. In countries below the threshold level, FDI<br/>deliver no beneficial effects. The findings are robust to several sensitivity checks and<br/>consideration of endogeneity.<br/><br/>The second essay (Chapter 3) tests the channels and magnitude of R&amp;D spillovers<br/>from developed countries to East Asian countries (China, Korea, Malaysia, Singapore, and<br/>Thailand). It examines three possible spillover channels - imports, inward FDI, and outward<br/>FDI - using panel data for the period 1984-2005. It uses a novel panel estimator which<br/>allows for cross-sectional dependence and provides country-specific estimates of R&amp;D<br/>effects. There are several important conclusions emerge. First, both domestic and foreign<br/>R&amp;D are important for productivity improvements. Second, imports are the most important<br/>channel of spillovers while spillover effects via FDI in uncertain. Third, there is some<br/>evidence that domestic R&amp;D helps to increase the incidence of R&amp;D spillovers, especially<br/>via import channel. Fourth, the U.S. is a relatively stronger provider of spillovers than<br/>Japan.<br/><br/>Chapter 4, which is the final essay, examines the impact of insurance sector<br/>development on output growth, capital accumulation and productivity improvement. It uses<br/>panel data from 52 countries for the period 1981-2005, and applies a recent generalizedmethod-<br/>of moments (GMM) dynamic panel estimator. The results show that the<br/>development of insurance sector is important for long-run output growth, capital<br/>accumulation and productivity growth. For developing countries, insurance affects growth<br/>predominantly through capital accumulation while in developed countries it enhances<br/>productivity growth. The findings are robust to biases introduced by unobserved countryspecific<br/>effects, simultaneity, weak or numerous instruments. It remains valid even after<br/>controlling for bank and stock market developments.

Name dc:type.qualificationname

Ph.D.

Level dc:type.qualificationlevel

doctoral

Grantor dc:publisher.institution

University of Southampton

Year dc:date.issued

2009

Author dc:creator

• Wan Ngah, Wan Azman Saini

Advisors dc:contributor.advisor

• Pitarakis, Jean-Yves
• Calvo Pardo, Hector
• Smith, Peter