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FDI, Regulations and Growth

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  • Busse, Matthias
  • Groizard Cardosa, José Luis

Abstract

The paper explores the linkage between income growth rates and foreign direct investment (FDI) inflows. So far the evidence is rather mixed, as no robust relationship between FDI and income growth has been established. We argue that countries need a sound business environment in the form of good government regulations to be able to benefit from FDI. Using a comprehensive data set for regulations, we test this hypothesis and find evidence that excessive regulations restrict growth through FDI only in the most regulated economies. This result holds true for different specifications of the econometric model, including instrumental variable regressions. --

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Bibliographic Info

Paper provided by Verein für Socialpolitik, Research Committee Development Economics in its series Proceedings of the German Development Economics Conference, Berlin 2006 with number 6.

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Date of creation: 2006
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Handle: RePEc:zbw:gdec06:4729

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Keywords: Multinationals; Spillovers; Institutions; Development;

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Cited by:
  1. Prabir De, 2011. "Do institutions matter for trade in Asian countries?," STUDIES IN TRADE AND INVESTMENT, in: Trade-led growth: A sound strategy for Asia, chapter 9 United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
  2. Khan, M.A. & Samad, G., 2010. "Intellectual Property Rights And Foreign Direct Investment: Analysis Of 14 South And South East Asian Countries, 1970-2005," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 10(1).

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