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Institutional Clusters and FDI Flows to the MENA Region

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  • Wasseem Mina

    (United Arab Emirates University)

Abstract

The empirical literature on the institutions-FDI nexus has treated the influence of institutions individually despite the proven high correlation among them. This is a conceptual shortcoming. To overcome this limitation, we cluster institutions using Principal Component Analysis (PCA). We apply PCA to ICRG institutions for 17 MENA countries during the period 1984-2011. Three institutional clusters have been extracted: stability and order, quality of public administration, and presence of democratic systems. Using Prais-Winston regressions, our estimates show that the presence of a democratic system has a positive influence on FDI flows, while the quality of public administration has a surprisingly negative influence.

Suggested Citation

  • Wasseem Mina, 2017. "Institutional Clusters and FDI Flows to the MENA Region," Africagrowth Agenda, Africagrowth Institute, vol. 14(3), pages 8-11.
    • Handle: RePEc:afj:journ2:v:14:y:2017:i:3:p:8-11
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    Cited by:

    1. Federico Carril-Caccia & Juliette Milgram Baleix & Jordi Paniagua, 2019. "The foreign direct investment-institution nexus in oil-abundant countries," Working Papers 1903, Department of Applied Economics II, Universidad de Valencia.
    2. Andrzej Cieślik & Sarhad Hamza, 2022. "Inward FDI, IFRS Adoption and Institutional Quality: Insights from the MENA Countries," IJFS, MDPI, vol. 10(3), pages 1-19, June.
    3. Simplice A. Asongu & Vanessa S. Tchamyou & Ndemaze Asongu & Nina Tchamyou, 2018. "The Comparative African Economics of Governance in Fighting Terrorism," Research Africa Network Working Papers 18/055, Research Africa Network (RAN).
    4. Nouha Bougharriou & Walid Benayed & Foued Badr Gabsi, 2021. "Under Which Condition Does the Democratization of the Arab World Improve FDI?," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 63(2), pages 224-248, June.

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