Impacts of Trade Openness and Technology Transfer on Economic Growth and Total Factor Productivity in Nigeria

ABSTRACT Foreign direct investment (FDI) is often seen as an important catalyst for economic growth in the developing countries. It affects the economic growth by stimulating domestic investment, increasing human capital formation and by facilitating the technology transfer in the host countries. The main purpose of the study is to investigate the impact of FDI on economic growth in Pakistan, for the period 1990- 2006. The relationship between FDI and economic growth will be analyzed by using the production function based on the endogenous growth theory, other variables that affect economic growth such as Trade, domestic capital, labour and human capital will also be used. The expected results of the study are a positive and statistically significant relation between the real per-capita GDP and FDI. Policy recommendations could be suggested in the light of the results obtained, regarding the impact of trade in Nigeria The debate about how growth can be generated and sustained in Africa, particularly in sub Saharan Africa has pitched scholars and even policy analysts against one another. Of interest is the debate over the relative roles of foreign aid and international trade in re-starting growth and placing it on a sustained path. A question that is frequently asked is does Africa need aid or trade? The empirical literature is far from being conclusive on the relative impact of aid and trade in fostering growth in sub Saharan Africa. Based on the endogenous growth model, this study seeks to examine the impact of trade and trade related activities vis-à-vis the impact of aid on economic growth. Using a feasible generalized least squares technique on an unbalanced panel of 47 sub Saharan countries from 1970 to 2007, and a set of trade and trade related variable on the one hand and a set of aid variables on the other, while controlling for other important environmental factors, the study observes that nthe relationship between trade and growth is positive and more robust than the relationship between aid and growth in sub Saharan Africa. However, when the study controls for the impact of commodity price boom, the relationship between growth and trade became less robust. The study observes that the robust relationship between trade and growth is more price-induced than volume-induced, suggesting that favorable international terms-of-trade has been a major driving force behind the trade-growth relationship. The study concludes by making findings-specific recommendations on how aid can work better in sub Saharan Africa and on how trade can be wealth-creating and growth-inducing.