Open Access
Article
SciPap-1615
How Foreign Direct Investment, Trade Openness, and Productivity Affect Economic Growth: Evidence From 90 Middle-income Countries
by
Khoa Dang Duong 1,* 
, Suu Duy Nguyen 2, Thi Thanh-Phuong Phan 3 and Long Luong 4
1 Faculty of Finance and Banking, Ton Duc Thang University, 19 Nguyen Huu Tho Street, Tan Phong Ward, District 7, Ho Chi Minh City 700000, Viet Nam
2 Faculty of Finance and Banking, Ton Duc Thang University, 19 Nguyen Huu Tho Street, Tan Phong Ward, District 7 700000, Viet Nam
3 Faculty of Finance and Banking, Ton Duc Thang University, 19 Nguyen Huu Tho Street, Tan Phong Ward, District 7 700000, Viet Nam
4 Faculty of Finance and Banking, Ton Duc Thang University, 19 Nguyen Huu Tho Street, Tan Phong Ward, District 7 700000, Viet Nam
* Authors to whom correspondence should be addressed.
Abstract: This paper examines the relationship between total factor productivity, trade openness, and foreign direct investment to economic growth in 90 middle-income countries from 1990 to 2020. We employ the Generalized Method of Moments with country and period fixed effects to overcome heteroscedasticity and endogeneity issues. The findings indicate a percentage increase in net FDI inflows and Trade Openness improves economic growth by 0.13% and 0.19%, respectively. However, total factor productivity negatively impacts growth due to the improper allocation of resources across sectors. Our paper contributes policy implications to develop economies sustainably. Finally, our findings support comparative advantage (Ricardo, 2015), the internalization theory of Buckley and Casson (1976), and industrialization theories.
Keywords: Economic Growth, Trade Openness, Fdi, Total Factor Productivity, Middle-Income Countries
JEL classification: B17 - International Trade and Finance, B27 - International Trade and Finance, F43 - Economic Growth of Open Economies
Received: 9 November 2022 / Revised: 12 January 2023 / Accepted: 3 February 2023 / Published: 7 February 2023
