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Foreign direct investment and institutional reform: evidence and an application to Portugal

  • Paulo Júlio

    ()

  • Ricardo Pinheiro–Alves

    ()

  • José Tavares

    ()

We examine the role of geographic, economic, and institutional factors in attracting Foreign Direct Investment (FDI) in Europe, using a cross-section of inward bilateral investments. We estimate and assess the expected benefits, the required reform efforts, and the efficiency of reform options corresponding to a convergence of Portuguese institutions to EU standards. We conclude that improving home institutions is likely to have a quantitatively very significant role in attracting FDI. Geographical and market size factors also play a role. Reforms promoting the independence of financial institutions and a leaner bureaucracy, lowering political risk and corruption, and improving the investment code may significantly affect the amount of bilateral inward FDI that is targeted to Portugal. Copyright ISEG 2013

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File URL: http://hdl.handle.net/10.1007/s10258-013-0093-z
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Article provided by Springer in its journal Portuguese Economic Journal.

Volume (Year): 12 (2013)
Issue (Month): 3 (December)
Pages: 215-250

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Handle: RePEc:spr:portec:v:12:y:2013:i:3:p:215-250
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