Foreign Direct Investment and the Effect on Economic Growth in Finland
Nikkilä, Mikko (2017-10-18)
Foreign Direct Investment and the Effect on Economic Growth in Finland
Nikkilä, Mikko
(18.10.2017)
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Turun yliopisto
Tiivistelmä
The purpose of the thesis is to look at the history of foreign direct investment from Finland's point of view, the theories of direct investment at the firm-level, the impact of taxation on foreign direct investment and hence on economic growth, as well as previous studies on the effects of direct investment on economic growth and finally an empirical analysis on the effect foreign direct investment has on the economic growth in Finland.
As for the theories, the thesis focuses mainly on firm-level theories, as they are essentially the underlying force that makes foreign direct investments behave as they behave.
The effect of foreign direct investment on economic growth in Finland is studied by using macro-level data acquired from UNCTAD, spanning from 1980 up to 2015. The empirical model is by principle a simple regression model which is modeled by using a dynamic OLS method.
The results show that both outward and inward foreign direct investment have a positive impact on the economic growth of Finland. However, it should be noted that a large portion of the inward foreign direct investment do not remain in Finland but rather flow to subsidiaries. The reasons for the positive effects of outbound investments can be at least partially attributed to increased domestic competition and the market being opened to other domestic companies.
As for the theories, the thesis focuses mainly on firm-level theories, as they are essentially the underlying force that makes foreign direct investments behave as they behave.
The effect of foreign direct investment on economic growth in Finland is studied by using macro-level data acquired from UNCTAD, spanning from 1980 up to 2015. The empirical model is by principle a simple regression model which is modeled by using a dynamic OLS method.
The results show that both outward and inward foreign direct investment have a positive impact on the economic growth of Finland. However, it should be noted that a large portion of the inward foreign direct investment do not remain in Finland but rather flow to subsidiaries. The reasons for the positive effects of outbound investments can be at least partially attributed to increased domestic competition and the market being opened to other domestic companies.