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The Impact Of Institutional Efficiency On The Foreign Direct Investment Inflows In Developing Countries

Author

Listed:
  • Alena D. Galenkova

    (Graduate School of Economics and Management, Ural Federal University, Yekaterinburg)

  • Igor M. Drapkin

    (Graduate School of Economics and Management, Ural Federal University, Yekaterinburg)

  • Oleg S. Mariev

    (Graduate School of Economics and Management, Ural Federal University and Institute of Economics, Ural Branch of the Russian Academy of Sciences; Yekaterinburg)

Abstract

The aim of this paper is assessing the impact of the effectiveness of the country's institutions on the foreign direct investment inflows in developing countries with the use of econometric modeling. We put forward a hypothesis about the positive impact of institutional factors on the foreign direct investment inflow. The overall influence of institutions is evaluated using the multiplication of the index of economic freedom and the state fragility index, as two indices, most fully characterizing the disjoint groups of the institutions. To achieve the main goal of the study, we accomplish the econometric modeling based on data from the World Bank, the Heritage Foundation and the Fund for Peace from 1995 to 2015. As the main tool of econometric analysis, a panel regression with fixed effects is used and the technique of a two-step least-squares regression analysis method with instrumental variables is used to solve a possible endogeneity problem in the model. As a result of the study, an assessment of the overall impact of institutional factors through the composition of indices was carried out and a hypothesis about the positive impact of institutional factors on the inflow of foreign direct investment in developing countries was confirmed.

Suggested Citation

  • Alena D. Galenkova & Igor M. Drapkin & Oleg S. Mariev, 2018. "The Impact Of Institutional Efficiency On The Foreign Direct Investment Inflows In Developing Countries," CBU International Conference Proceedings, ISE Research Institute, vol. 6(0), pages 141-145, September.
  • Handle: RePEc:aad:iseicj:v:6:y:2018:i:0:p:141-145
    DOI: 10.12955/cbup.v6.1146
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    More about this item

    Keywords

    foreign direct investmentinstitutional factors; developing countries; econometric analysis; panel data.;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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