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Journal of Business and Management Sciences. 2013, 1(6), 133-138
DOI: 10.12691/jbms-1-6-3
Open AccessArticle

Relationship of Labor Productivity, Foreign Direct Investment and Economic Growth: Evidence from OECD Countries

Abdullah Alam1, , M. Usman Arshad1 and WasimUllah Rajput2

1Department of Management Sciences, International Islamic University Islamabad, Pakistan

2Director Staff College, National Bank of Pakistan, Islamabad, Pakistan

Pub. Date: December 11, 2013

Cite this paper:
Abdullah Alam, M. Usman Arshad and WasimUllah Rajput. Relationship of Labor Productivity, Foreign Direct Investment and Economic Growth: Evidence from OECD Countries. Journal of Business and Management Sciences. 2013; 1(6):133-138. doi: 10.12691/jbms-1-6-3


The aim of this study is to have an insight into the causality relationships between economic growth and two of its key determinants, foreign direct investment and labor productivity. Error correction mechanism, through the implementation of generalized method of moments (GMM), is used to study the causalities between the three variables. This study encompasses data from nineteen (19) OECD member countries over a period of 1980-2009. Short-term causalities have been observed running from foreign direct investment to economic growth, labor productivity to economic growth and foreign direct investment to labor productivity. In the long-run, bi-directional causalities exist between economic growth and labor productivity, foreign direct investment and labor productivity. Also, foreign direct investment is observed to cause economic growth in the long-run.

economic growth foreign direct investment labor productivity labor economics generalized method of moments (GMM) estimator panel causality analysis

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