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With the increasing importance of Foreign Direct Investment (FDI), there have been substantial studies on this issue, both empirically and theoretically. However, most existing studies focus on either the impacts of FDI presence or the determinants of FDI inflows, ignoring the fact that inward FDI and economic development may simultaneously affect each other. This thesis sets out to examine the interactive effects between FDI and economic development. The whole thesis is composed of five chapters. Chapter One is an overall introduction to the thesis. Chapter Two presents a theoretical study and chapter Two and Three provide two empirical studies. Chapter Five concludes. Chapter Two presents a theoretical two-sector model that features the importance of human capital in attracting foreign investment. This model theoretically explains why FDI is more likely to occur among countries that are similar in terms of human capital and technology. On the other hand, MNCs must train local employees to work with firm-specific technology and hence improve the technological skills of local workers. In Chapter Two, an empirical model is constructed to detect whether the productivities of foreign and local firms impact each other. The model is tested on China’s data at the industry level. The results indicate that productivity growth of local and foreign firms are jointly determined. Evidence also suggests that the extent to which spillovers occur varies with difference technology levels of local firms. Chapter Four investigates the relationship between FDI and economic grown based on a panel of data for 84 countries over the period 1970-1999. Both equations of FDI inflow and GDP growth are examined. The results indicate that FDI not only directly promotes economic growth by itself, but also indirectly does so via its interaction terms. There is a strong positive interaction effect of FDI with human capital and a strong negative interaction effect of FDI with technology gap on economic growth in developing countries.

This dissertation is divided into six chapters, as foHows: Chapter 1 of this dissertation discusses the growing significance of FDI for developing countries. It compares FDT in developed and developing countries and analyses recent evidence ofFDI flows to developing countries. Chapter 2 analyses the (endogenous and exogenous) detenninants ofFDI flows into developing countries. Chapter 3 discusses the importance of FDI flows, which are essential for new investments or for financing fortuitous deficits in host countries, and looks at the adjustment mechanisms for the equilibrium of the balance of payments. Chapter 4 gives attention to FDI flows, the liberalisation of financial markets and the financial account of the balance of payments in developing countries in providing more opportunities and mechanisms for development and economic growth. Finally, chapter S examines and compares FDI flows tu South Africa and Angola - the biggest FDI recipients on the African continent. / Economics / MCom (Economics)

This dissertation is divided into six chapters, as foHows: Chapter 1 of this dissertation discusses the growing significance of FDI for developing countries. It compares FDT in developed and developing countries and analyses recent evidence ofFDI flows to developing countries. Chapter 2 analyses the (endogenous and exogenous) detenninants ofFDI flows into developing countries. Chapter 3 discusses the importance of FDI flows, which are essential for new investments or for financing fortuitous deficits in host countries, and looks at the adjustment mechanisms for the equilibrium of the balance of payments. Chapter 4 gives attention to FDI flows, the liberalisation of financial markets and the financial account of the balance of payments in developing countries in providing more opportunities and mechanisms for development and economic growth. Finally, chapter S examines and compares FDI flows tu South Africa and Angola - the biggest FDI recipients on the African continent. / Economics / MCom (Economics)