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Article
International Productivity Differences and Roles of Domestic Investment, FDI and Trade
International Economic Journal (2009)
  • Hiranya K Nath, Sam Houston State University
  • Halis M Yildiz, Ryerson University
  • Gouranga G Das, Hanyang University
Abstract
This paper calculates Theil’s entropy index to measure the extent of productivity di¤erences across 92 countries for the period from 1970 to 2003. While there is evidence of increasing di¤erences in productivity across these countries, we observe di¤erent patterns when we group the countries by income levels. These di¤erences seem to have decreased among middle income developing and developed countries whereas they have widened among low and high income developing countries. Multivariate time series analysis results suggest that FDI increases productivity di¤erences among low and high income developing countries whereas domestic investment reduces these di¤erences among low income countries in the long-run. Granger causality test results indicate that while an increase in domestic investment slows down the growth of trade, a higher growth of trade attracts FDI to middle income countries. Furthermore, a reduction in productivity di¤erences and a higher FDI growth accelerate the growth of trade in developed countries.
Keywords
  • Productivity di¤erences,
  • Theil's entropy index,
  • domestic
Publication Date
2009
Citation Information
Hiranya K Nath, Halis M Yildiz and Gouranga G Das. "International Productivity Differences and Roles of Domestic Investment, FDI and Trade" International Economic Journal Vol. 23 Iss. 1 (2009)
Available at: http://works.bepress.com/hiranya_nath/8/