Assessing the Influence of Foreign Direct Investment on the Economic Growth of United States

Abstract

Researchers have found mixed empirical results on the significance of Foreign Direct Investment (FDI) on countries around the world. Foreign direct investment has been a major driver in the economic growth of both developed and developing economies. This study examines the influence of FDI on economic growth in a single developed country, the United States. Even though the United States has been the largest attractive nation for foreign direct investment among developed economies, there is need to research on how FDI has contributed to its development. Therefore, this paper uses multiple linear regression model and its estimation using ordinary least squares (OLS) to study the impact of FDI on economic growth in the United States. Analysis of secondary data from the Bureau of Economic Analysis (BEA), and Bureau of Labor Statistic (BLS) for the year 2000 to 2018 revealed that foreign direct investment has a positive influence on the economic growth of United States. Therefore, the study recommends that the government of United States should continue to revamp investment and fiscal policies to attract new foreign investors through continuous investing in social infrastructures, improving the quality of their institutions and their governance.

Keywords: Gross Domestic Product (GDP), Foreign Direct Investment, Inflation Rate, Economic Growth.

DOI: 10.7176/JESD/11-16-12

Publication date:August 31^st 2020