US foreign direct investment, technology transfer and the productivity of hydrocarbon-dependent economies: The case of Algeria

Abstract

This article investigates the impact of US Direct Investments (foreign direct investments [FDI]) as channel of international technology transfer on total factor productivity (TFP) of Algeria from 1969 to 2019. We use export diversification distance as relative backwardness (GAP) and revealed comparative advantage (RCA) as trade concentration term. An autoregressive distributed lag (ARDL) approach is used to check for the long-run relationship. The results show that considering the sector of investment, the TFP is differently impacted. Indeed, the impact of FDI of hydrocarbon activities on TFP is negative and statistically significant. As for the out-hydrocarbons sector, the impact is positive with statistical significance. The negative impact of FDI in the scope of hydrocarbons sector can be mainly explained by the effect of industry concentration. This is supported empirically by the negative effect of RCA. We also find that large GAP has negative effect on TFP, contrasting the theory of the advantage of the relative backwardness.