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Abstract This paper investigates whether foreign direct investment (FDI) affect economic growth based on a panel data of 29 provinces over the period 1987–2004. Both fix-effect and random-effect techniques are applied to examine this relationship. Endogenous relationship between FDI and economic growth is also considered. The result indicates that FDI hasn’t been of great benefit to economic growth by itself, while it can promote economic growth via its interaction terms with human capital. The interaction of FDI with those who have received middle school education exerts strong positive effect on economic growth. And the interaction with high school education people exerts positive but not significant effect during 2000-2004.
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Received: 25 October 2007
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2007, Vol. 1 
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