Stimulating Economic Growth through Foreign Direct Investment

The economic growth is a goal for all countries of the world, being also a condition of society’s progress. Expressed by the growth rhythm of macroeconomic indicators, the economic growth and, especially, the economic development is a long term process which involves the quantitative and especially qualitative increasing of production factors, especially the human factor and the investments. The Foreign Direct Investment (FDI) are affecting the economic growth in many aspects. It was demonstrated over the years in countless studies that the Foreign Direct Investment are enhancing the growth and economic development of the countries where these are localized, contributing to productivity growth, the wages growth of workforce involved in the production process and its qualification, the volume of exports growth of host countries etc. It is well known also that the international investments have a major role in the transfer of technologies, encouraging research and innovation and generating economic progress. This paper proposes a theoretical growth model taking into account the FDI along with domestic capital. The proposed model analyses the relationship between amount of production, workforce, domestic capital and FDI, demonstrating that the use of national investments and workforce leads to much higher productions in the presence of FDI.