Technological impact of the international trade on the economic growth: investment mechanism

Abstract

This paper investigates the potential impact of changes in the export structure on economic growth by attracting foreign direct investment. The theoretical basis of the link between international trade and economic growth, namely its technological aspect, acting through foreign direct investment is the subject of the research. This relationship can serve as an explanation of the rapid economic growth in those countries that substitute raw materials sector for technology exports. Particular attention is paid to how this process evolves in the developing countries. The mechanism of the influence of FDI on the economy as a whole, their effect on the accumulation of capital in the country, and the ability of countries to effectively receive capital investment from abroad, depending on the educational level of human capital are analyzed. The paper underlines that in modern models of mechanisms of impact of the international trade on economic growth the key element is foreign direct investment. The papers of such endogenous growth theory authors as G. Hrosmen, E. Helpmena,P. Romer are of the utmost interest. The purpose of this study is to examine the impact of FDI on economic growth and to identify the channels of such an influence. It is important to examine how FDI interact with the level of accumulation of human capital. Foreign investment is the most efficient force of growth for those countries that have the best base for their reception. We also believe that FDI contribute to economic growth if and only if the recipient country has sufficient absorbent capacity for advanced technologies. In addition, the positive effects of FDI affect operational efficiency, and not just due to the higher level of capital accumulation. Further research in this area will cover the calculation of an empirical link between FDI and economic growth.