Openness and the International allocation of foreign direct investment
AbstractThis paper develops an ordinal index to measure the openness of FDI policy regimes for individual countries. There has been a generalised increase in the index between 1990 and 2002. The most important determinants of variations in FDI flows across countries and over time are country size, the level of educational achievement, and growth. The openness index is positively associated with FDI flows, but its explanatory power is low. Liberalising approval procedures and lifting requirements that foreign companies enter into joint ventures with domestic firms encourage FDI. We conclude that the openness of the FDI regime operates as a factor enabling FDI, but that location advantages are paramount in determining the international allocation of FDI. We also turn the question around and ask what countries are more likely to impose restrictions on FDI. We find that lower levels of education and larger domestic markets are associated with greater restrictions on FDI. In addition, there is some evidence that better institutions are associated with lower FDI restrictions.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Journal of Development Studies.
Volume (Year): 43 (2007)
Issue (Month): 7 ()
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Other versions of this item:
- Manuel R. Agosin & Roberto Machado, 2006. "Openness and the International Allocation of Foreign Direct Investment," IDB Publications 14338, Inter-American Development Bank.
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- Yeaple, Stephen Ross, 2003. "The complex integration strategies of multinationals and cross country dependencies in the structure of foreign direct investment," Journal of International Economics, Elsevier, vol. 60(2), pages 293-314, August.
- Holger Gorg & Henning Muhlen & Peter Nunnenkamp, 2010.
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