This study investigates the relationship between foreign direct investment (FDI), total factor productivity (TFP), and economic growth in 90 middle-income countries from 1990 to 2020. Using the dynamic system Generalized Method of Moments (GMM), the results show a positive correlation between FDI and economic growth (a 1% increase in FDI leads to a 9.3% increase in growth), and TFP also positively impacts growth. Furthermore, TFP strengthens the positive link between FDI and growth. These findings support economic growth and industrialization theories but not labor market dynamics theories. The study offers policy suggestions for sustainable economic development in middle-income countries.

Hoa Thanh Phan Le, Ha Pham, Nga Thi Thu Do, Khoa Dang Duong