IMPACT OF FDI, ENERGY AND IMPORTS ON TOTAL FACTOR PRODUCTIVITY IN HIGH AND MIDDLE INCOME ECONOMIES

Muhammad SHAFIQ-UR-REHMAN* and Mohammed NISHAT**

FDI (Foreign Direct Investment) and international trade have been noticeable characteristics of the world economy over the last few decades. The importance of trade and FDI has received considerable attention from policymakers and academic researchers. Against this backdrop, this study attempts to observe and compare the effect of FDI, imports and energy on growth in Total Factor Productivity (TFP) on high and middle-income economies by using two separate panel data sets from 1990 to 2019 by employing the Feasible Generalized least square method. Results suggest that FDI in both high and middle-income economies is positively and statistically significant and related to TFP. Moreover, the impact of imports and energy in middle-income economies is statistically significant, and they affect TFP negatively and positively, respectively. Results further manifest that in world economies, the transfer of proprietorship to private foreign hands is linked with productivity gains; however, imports are offsetting these gains in middle-income economies.