The Effect of Economic Institutions on Foreign Direct Investment: Case of LATIN AMERICAN AND CARIBBEAN COUNTRIES
Article Sidebar
Main Article Content
Abstract
This study focuses on examining the effect of Economic Institutions on Foreign Direct Investment (FDI) inflows in 24 developing Latin American and Caribbean (LAC) countries. This study used panel data over the period 1995 to 2015 , for its emerical investigation, by using a fixed-effects model as suggested by Hausman after controlling for heteroscedasticity. The empirical finding suggests that the counties can attract more FDI if they enhance their economic institutions despite deficiencies in market size, trade openness and high level of human capital. However the development level seems to have an equal importance as that of economic institutions and is significant at all levels in LAC. The study also shows significant relation with controlling variables namely GDP per Capita and human capital.
Article Details
References
Barro, R. J., & Wha, J. (2015). A new data set of educational attainment in the world , 1950 – 2015 ☆. Journal of Development Economics, 104, 184–198. https://doi.org/10.1016/j.jdeveco.2012.10.001
Buchanan, B. G., Le, Q. V., & Rishi, M. (2012a). Foreign direct investment and institutional quality: Some empirical evidence. International Review of Financial Analysis, 21(24), 81–89. https://doi.org/10.1016/j.irfa.2011.10.001
Buchanan, B. G., Le, Q. V, & Rishi, M. (2012b). International Review of Financial Analysis Foreign direct investment and institutional quality : Some empirical evidence. International Review of Financial Analysis, 21(24), 81–89. https://doi.org/10.1016/j.irfa.2011.10.001
Daude, C., & Stein, E. (2007). the Quality of Institutions and Foreign Direct Investment. Economics & Politics, 19(3), 317–344. https://doi.org/10.1111/j.1468-0343.2007.00318.x
Dunning, J. H. (1998). Location and the Multinational Enterprise: A Neglected Factor?, 1, 45–66.
Gani, A. (2007). Governance and foreign direct investment links: evidence from panel data estimations. Applied Economics Letters, 14(10), 753–756. https://doi.org/10.1080/13504850600592598
Hausman, J. A. (1978). Specification Tests in Econometrics. Econometrica, 46(6), 1251–1271.
Kaufmann, D. (2015). The Worldwide Governance Indicators : Methodology and Analytical Issues.
Mengistu, A. A., & Adhikary, B. K. (2011). Does good governance matter for FDI inflows? Evidence from Asian economies. Asia Pacific Business Review, 17(3), 281–299. https://doi.org/10.1080/13602381003755765.