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The determinants of foreign direct investment: a panel data study for the OECD countries

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  • Agiomirgianakis, G. M.
  • Asteriou, D.
  • Papathoma, K.

Abstract

This study examines panel data evidence concerning empirical relevance between Foreign Direct Investment (FDI) attraction and its determinative effects. The main bulk of FDI is among the developed countries. Indeed, OECD countries has probably been the most potential group in undertaking FDI by caring out about 95% of the total outward FDI while, on average, 75% of the world FDI was directed into OECD countries. In this paper, we first present and analyse the theoretical/empirical findings on FDI, then we focus on assessing the relative significance of the factors that may attract FDI via a panel data regression analysis for a sample consisting of 20 OECD countries for 23 years (1975-1997). Our findings suggest that certain variables such as human capital and trade regime, as well as, the density of infrastructure appear to be robust under different specifications. Positive significance of the agglomeration factor is also observed, confirming the relevant theoretical propositions. However certain deferential variables, such as the governmental policy effect, could not be fully captured due to the statistical homogeneity of the sample.

Suggested Citation

  • Agiomirgianakis, G. M. & Asteriou, D. & Papathoma, K., 2003. "The determinants of foreign direct investment: a panel data study for the OECD countries," Working Papers 03/06, Department of Economics, City University London.
    • Handle: RePEc:cty:dpaper:03/06
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    2. Luiz de Mello, 1997. "Foreign direct investment in developing countries and growth: A selective survey," Journal of Development Studies, Taylor & Francis Journals, vol. 34(1), pages 1-34.
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    2. Daniele, Vittorio, 2007. "Criminalità e investimenti esteri. Un’analisi per le province italiane [The effect of organized crime on Foreign Investments. An Empirical Analysis for the Italian Provinces]," MPRA Paper 6417, University Library of Munich, Germany.
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    4. Horas Djulius, 2017. "Energy Use, Trade Openness, and Exchange Rate Impact on Foreign Direct Investment in Indonesia," International Journal of Energy Economics and Policy, Econjournals, vol. 7(5), pages 166-170.
    5. Vittorio, Daniele & Ugo, Marani, 2008. "Organized Crime and Foreign Direct Investment: the Italian Case," MPRA Paper 7217, University Library of Munich, Germany.
    6. Juliana D. Araujo & Povilas Lastauskas & Chris Papageorgiou, 2017. "Evolution of Bilateral Capital Flows to Developing Countries at Intensive and Extensive Margins," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 49(7), pages 1517-1554, October.
    7. Kafayat Amusa & Nara Monkam & Nicola Viegi, 2016. "Foreign Aid and Foreign Direct Investment in Sub-Saharan Africa: A Panel Data Analysis," Working Papers 201642, University of Pretoria, Department of Economics.
    8. Dauti, Bardhyl, 2008. "Determinants of Foreign Direct Ivestment inflow in South East European Countries - Panel Estimation," MPRA Paper 18273, University Library of Munich, Germany.
    9. Ogbeifun Lawrence & Shobande Olatunji Abdul, 2020. "Causality Analysis of Disaggregated FDI Inflows on Sectorial Growth in OECD Area," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 30(4), pages 92-110, December.
    10. Berghäll, Elina, 2008. "Revealing Agglomeration Economies with Stochastic Frontier Modelling in the Finnish ICT Industry," Discussion Papers 435, VATT Institute for Economic Research.
    11. Balázs Égert, 2021. "Investment in OECD Countries: a Primer," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 63(2), pages 200-223, June.
    12. Antonio Baez, 2014. "“A panel data analysis of FDI and informal labor markets”," IREA Working Papers 201404, University of Barcelona, Research Institute of Applied Economics, revised Feb 2014.
    13. George Pantelopoulos, 2023. "Tertiary Levels of Education and Foreign Direct Investment: Evidence from Europe," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(2), pages 1488-1502, June.
    14. Odysseas Katsaitis & Dimitris Doulos, 2009. "The Impact of EU Structural Funds on FDI," Kyklos, Wiley Blackwell, vol. 62(4), pages 563-578, November.
    15. Camarero, Mariam & Montolio, Laura & Tamarit, Cecilio, 2019. "What drives German foreign direct investment? New evidence using Bayesian statistical techniques," Economic Modelling, Elsevier, vol. 83(C), pages 326-345.
    16. Faris Nasif Al Shubiri, 2016. "Determinants Of Foreign Direct Investment: Evidence Of Sultanate Of Oman," Polish Journal of Management Studies, Czestochowa Technical University, Department of Management, vol. 13(2), pages 7-17, June.
    17. Md Kamrul Hasan & Nurun Nahar Nishi, 2019. "An Analysis of the Impact of GDP, Trade openness, Inflation rate and Market size in Attracting Inward FDI in Bangladesh Based on Empirical Analysis," International Journal of Science and Business, IJSAB International, vol. 3(3), pages 278-291.
    18. Dmitry Burakov & Maxim Intse & Max Freidin, 2018. "Energy Consumption, Trade Openness and Exchange Rate Impact on Foreign Direct Investment in Union State of Russia and Belarus," International Journal of Energy Economics and Policy, Econjournals, vol. 8(4), pages 77-82.
    19. Komlan Fiodendji & Kodjo Evlo, 2015. "Do Institutions Quality Affect FDI Inflows in Sub-Saharan African Countries?," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 5(1), pages 1-8.
    20. Mariam Camarero & Laura Montolio & Cecilio Tamarit, 2019. "Determinants of German outward FDI: variable selection using Bayesian statistical," Working Papers 1906, Department of Applied Economics II, Universidad de Valencia.
    21. Grzegorz Górniewicz & Adrianna Czarnecka, 2021. "Foreign Direct Investments In The World With Special Consideration Of Consequences," Baltic Journal of Economic Studies, Publishing house "Baltija Publishing", vol. 7(2).
    22. Maralgua Och & Christian Baerbig & Tsolmon Jadamba, 2017. "Determinants of Inward FDI in Mongolia: An Application of the ARDL Bounds Testing Approach to Cointegration," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 7(3), pages 307-333, March.
    23. Hossain, Saddam & Masih, Mansur, 2018. "Is the relationship between FDI and inflation nonlinear and asymmetric? new evidence from NARDL approach," MPRA Paper 112549, University Library of Munich, Germany.
    24. Grzegorz Tchorek & Michał Brzozowski & Paweł Śliwiński, 2017. "Determinants of capital flows to emerging and advanced economies between 1990 and 2011," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 16(1), pages 17-48, April.
    25. Erdal Demirhan & Mahmut Masca, 2008. "Determinants of foreign direct investment flows to developing countries: a cross-sectional analysis," Prague Economic Papers, Prague University of Economics and Business, vol. 2008(4), pages 356-369.

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