The Process of Catching up with the Economic Development of OECD Countries and the Role of Foreign Direct Investment in this Process

Abstract

The article consists of two parts. In part one we describe the level of economic development of 51 countries associated with the Organization for Economic Cooperation and Development (OECD) in terms of their GDP per capita. We suggest dividing these countries into three groups: highly, moderately, and least developed. Then, using the average annual growth rate in the period 2005–2016, we distinguish countries: developing, in stagnation, and in recession. Combining these two variables, we propose to distinguish 7 subgroups of countries: from highly developed fleeing, through highly developed stable and caught up countries to the countries medium and least developed that are catching up. In part two of the article we analyze foreign direct investment (FDI) in global terms, OECD countries, and the European Union (EU); in particular we examine capital flows between the previously specified three (high, medium and least developed) groups of OECD countries. Finally, we present regression models confirming the positive feedback between FDI and economic growth. They testify to the pro-cyclical impact of foreign direct investment.