Resources Science ›› 2020, Vol. 42 ›› Issue (11): 2132-2144.doi: 10.18402/resci.2020.11.07

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Impact of foreign direct investment on Small Island States’ economic growth: An analysis based on the threshold effect of tourism

GUO Yue1,2(), HUANG Youxing3, YANG Yu1,2,4(), LIU Shuguang3, WANG Chang5, HUANG Xinrong1,2   

  1. 1. Key Laboratory of Regional Sustainable Development Modelling, Institute of Geographic Sciences and Natural Resources Research, CAS, Beijing 100101, China
    2. College of Resources and Environment, University of Chinese Academy of Sciences, Beijing 100049, China
    3. School of Economics, Ocean University of China, Qingdao 266100, China
    4. Institute of Strategy Research for Guangdong, Hong Kong and Macao Greater Bay Area, Guangzhou 510070, China
    5. School of Economics, Fudan University, Shanghai 200433, China
  • Received:2020-05-08 Revised:2020-09-07 Online:2020-11-25 Published:2021-01-25
  • Contact: YANG Yu;


Tourism and foreign direct investment (FDI) are important aspects of the sustainable economic growth of Small Island States. In this study, 30 Small Island States were selected as research objects, and the panel data of 1995-2015 were used to incorporate the interactive of FDI and tourism revenue into a two-way fixed effects model to explore whether there is a threshold effect between FDI and economic growth using tourism development as a threshold variable. The results show that: (1) Tourism has a significant positive correlation with the economic growth of Small Island States, and is an important industrial support for economic growth of Small Island States; (2) There is a double threshold effect based on the scale of tourism: Before the first threshold is reached, the effect of FDI on economic growth is negative; between the two thresholds, the effect of FDI on growth is not significant; but as the scale of tourism exceeds the second threshold, FDI functions as a clear stimulation for economic growth. The conclusion is helpful to deepen the understanding of the development pattern of island economies, and it has reference value for China’s international investment in small island countries, as well as domestic island tourism development.

Key words: Small Island States, foreign direct investment, economic growth, tourism development, threshold effect