What Fosters Innovation? A CrossSectional Panel Approach to Assessing the Impact of Cross Border Investment and Globalization on Patenting Across Global Economies
By Michael Dessau and Nicholas Vega
This study considers the impact of foreign direct investment (FDI) on innovation in high income, uppermiddle income and lowermiddle income countries. Innovation matters because it is a critical factor for economic growth. In a panel setting, this study assesses the degree to which FDI functions as a vehicle for innovation as proxied by scaled local resident patent applications. This study considers research and development (R&D), domestic savings, imports and exports, and quality of governance as factors which could also impact the effectiveness of FDI on innovation. Our results suggest FDI is most effective as inward direct investment in countries outside the technological frontier possessing adequate existing domestic investment capital and R&D spending to convert foreign investment capital and technological spillover into innovation. Nonetheless, FDI was not a consistent indicator for innovation; rather, the most consistent indicators across this study were R&D and domestic savings. Differences amongst income groups are highlighted as well as their varying responses to our array of causal factors.
Advisor: Lori Leachman | JEL Codes: A10, B22, C82, E00, E02, O10, O11, O30, O31, O32, O33, O34, O43
By Alexander Bloedel
This paper studies the mechanisms that link sociopolitical conflict and (expectations about) economic prosperity. Motivated by a large body of empirical and historical work on the correlation between economic development and democratization, I develop a game-theoretic model of economic growth with political economy constraints. In an economy where low income agents are credit constrained, rapid and robust economic growth leads to increasing inequality early on, but provides the means to mitigate civil conflict when inequality becomes suciently large. The rate and persistence of growth similarly determines the stability of extant political institutions and the ability to transition from dictatorship to democracy.
Advisor: Curtis Taylor | JEL Codes: D72, D74, O11, O43 | Tagged: Civil Conflict, Economic Growth, Expectations, Political Economy