The Impact Of Foreign Direct Investment On Total Factor Productivity And Economic Growth In Turkey

The main objective of this paper is to estimate the contributions of Foreign Direct Investment (FDI) to the aggregate growth and whether FDI have had an impact on total factor productivity (TFP) of Turkey for the period 1960-2005 using aggregate production function. This paper argues that the two main channels through which FDI can affect host country economic growth are technology spillovers and physical capital accumulation. Further, it intends to identify the casual linkage among FDI, TFP and economic growth and then evaluates various channels through which FDI is linked to TFP using some recent econometric techniques. The empirical results indicate that FDI contributes positively to TFP and growth via capital accumulation and technological spillovers.