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Foreign direct investment, human capital and endogenous economic growth across economic regions in Vietnam

By Doan Le Bach Truc (VNP 15)

Supervisor: Prof. Peter Calkins

Abstract

This research examined the relationship between FDI, human capital and economic growth using panel data of 51 provinces, grouped into six economic regions in Vietnam during period 1995-2010. In particular, it considers the cross–sectional and time effects of the model to examine the differential impacts of FDI, human capital on both aggregate and per capital growth in specific regions and periods. Moreover, the interaction terms of FDI and human capital are included in the models to investigate the multiplicative effects beside simple effects of each to growth. This study applied and compared the estimations of ordinary least square, random effects and fixed effect models to test the hypotheses of the research, including the residual tests to reduce the bias of results as possible. It found that FDI itself has no substantial direct impact upon growth or development, however, it does enhance growth and development via its interactions with human; the higher education brings more benefits to the economy. These results support the theory that FDI’s enhancement of economic growth depends upon the specific conditions or regulatory framework in the recipient countries.

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