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Foreign Direct Investment, Economic Freedom and Institutional Quality. An empirical analysis

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  • Héctor Rojo Domingo

    (Universidad de Zaragoza)

Abstract

The economic success of East Asian countries has been linked to their capacity to attract Foreign Direct Investment. In a globalized world in which FDI plays a decisive role in the development and modernization process of a country, as has been seen in the Asian case, it is worth wondering about the causes that explain the attraction of FDI to a country. This paper analyzes the impact of economic freedom and institutional quality on a country's ability to attract FDI. Based on the indexes provided by Heritage Foundation and the World Bank, new synthetic indexes are constructed for each variable and their impact on inward FDI is tested for a sample of 187 countries and territories using panel data estimation. The results show the importance of economic policy, and not merely institutional, in the economic success of countries

Suggested Citation

  • Héctor Rojo Domingo, 2025. "Foreign Direct Investment, Economic Freedom and Institutional Quality. An empirical analysis," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 103, pages 13-46, June.
    • Handle: RePEc:lde:journl:y:2025:i:103:p:13-46
    DOI: 10.17533/udea.le.n103a356103
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    References listed on IDEAS

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    1. Adam Przeworski & Fernando Limongi, 1993. "Political Regimes and Economic Growth," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 51-69, Summer.
    2. Peer Vries, 2012. "Does wealth entirely depend on inclusive institutions and pluralist politics?," The Other Canon Foundation and Tallinn University of Technology Working Papers in Technology Governance and Economic Dynamics 43, TUT Ragnar Nurkse Department of Innovation and Governance.
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    More about this item

    Keywords

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    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F68 - International Economics - - Economic Impacts of Globalization - - - Policy
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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