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Determinants of foreign direct investment flows to developing countries: a cross-sectional analysis

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  • Erdal Demirhan
  • Mahmut Masca

Abstract

The aim of this paper is to explore, by estimating a cross-sectional econometric model, the determining factors of foreign direct investment (FDI) inflows in developing countries over the period of 2000-2004. The study is based on a sample of cross-sectional data on 38 developing countries. We have used average value of all data for the 2000-2004 period. In the models, dependent variable is FDI. Independent variables are growth rate of per capita GDP, inflation rate, telephone main lines per 1,000 people measured in logs, labour cost per worker in manufacturing industry measured in logs, degree of openness, risk and corporate top tax rate. According to the econometric results, in the main model, growth rate of per capita, telephone main lines and degree of openness have positive sign and are statistically significant. Inflation rate and tax rate present negative sign and are statistically significant. Labour cost has positive sign and risk has negative sign. However, both are not significant.

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Bibliographic Info

Article provided by University of Economics, Prague in its journal Prague Economic Papers.

Volume (Year): 2008 (2008)
Issue (Month): 4 ()
Pages: 356-369

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Handle: RePEc:prg:jnlpep:v:2008:y:2008:i:4:id:337:p:356-369

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Related research

Keywords: FDI flows; developing countries; determinants of FDI; cross-sectional analysis;

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References

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Citations

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Cited by:
  1. Rao, R. Kavita & Sengupta, D.P., 2014. "Action Plan on Base Erosion and Profit Shifting: An Indian Perspective," Working Papers 14/133, National Institute of Public Finance and Policy.
  2. Václav Žďárek, 2009. "Modern methods of production and foreign direct investment," Politická ekonomie, University of Economics, Prague, vol. 2009(4), pages 509-543.
  3. Yulia Gorbunova & Davide Infante & Janna Smirnova, 2012. "New Evidence on FDI Determinants: An Appraisal Over the Transition Period," Prague Economic Papers, University of Economics, Prague, vol. 2012(2), pages 129-149.
  4. Aarón Garavito A. & Ana María Iregui B. & María Teresa Ramírez G., 2012. "Determinantes de la inversión extranjera directa en Colombia: Un estudio a nivel de firma," Borradores de Economia 714, Banco de la Republica de Colombia.
  5. Lenka Janíčková & Veronika Baranová, 2013. "Impact of Effective Tax Rates and Its Components on Foreign Direct Investment – The Case of the EU Member Countries," Politická ekonomie, University of Economics, Prague, vol. 2013(2), pages 209-228.
  6. Muhammad Tariq Majeed & Eatzaz Ahmad, 2009. "An Analysis of Host Country Characteristics that Determine FDI in Developing Countries: Recent Panel Data Evidence," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 14(2), pages 71-96, Jul-Dec.

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