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Foreign direct investment and the ease of doing business

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  • Adrian Corcoran

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  • Robert Gillanders

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Abstract

This paper examines the effect that a country’s business regulatory environment has on the amount of foreign direct investment it attracts. We use the World Bank’s Ease of Doing Business ranking to capture the costs that firms face when operating in a country. Several interesting results emerge. Firstly, the Doing Business rank is highly significant when included in a standard empirical foreign direct investment (FDI) model estimated on data averaged over the period 2004–2009. Secondly, the significance of the overall Doing Business is driven by the Ease of Trading Across Borders component. Thirdly, the relationship is significant for middle income countries, but not for the World’s poorest region, Sub-Saharan Africa, or for the OECD. Finally, we find no evidence that the ease of doing business of nearby countries has an effect on the FDI that a country gets in general. Copyright Kiel Institute 2015

Suggested Citation

  • Adrian Corcoran & Robert Gillanders, 2015. "Foreign direct investment and the ease of doing business," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 151(1), pages 103-126, February.
  • Handle: RePEc:spr:weltar:v:151:y:2015:i:1:p:103-126
    DOI: 10.1007/s10290-014-0194-5
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    References listed on IDEAS

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    1. Miriam Bruhn, 2011. "License to Sell: The Effect of Business Registration Reform on Entrepreneurial Activity in Mexico," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 382-386, February.
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    Cited by:

    1. repec:kap:iecepo:v:15:y:2018:i:3:d:10.1007_s10368-017-0377-3 is not listed on IDEAS
    2. Kose,Ayhan & Ohnsorge,Franziska Lieselotte & Ye,Lei Sandy & Islamaj,Ergys, 2017. "Weakness in investment growth : causes, implications and policy responses," Policy Research Working Paper Series 7990, The World Bank.
    3. Sharif M. Hossain & Nobuhiro Hosoe, 2017. "Foreign Direct Investment in the Ready-Made Garments Sector of Bangladesh : Macro and Distributional Implications," GRIPS Discussion Papers 17-10, National Graduate Institute for Policy Studies.
    4. Gillanders, Robert & Parviainen, Sinikka, 2014. "Experts’ Perceptions versus Firms’ Experiences of Corruption and Foreign Direct Investment," MPRA Paper 58991, University Library of Munich, Germany.
    5. Amar Iqbal Anwar & Mazhar Mughal, 2012. "Economic Freedom and Indian Outward Foreign Direct Investment: An Empirical Analysis," Economics Bulletin, AccessEcon, vol. 32(4), pages 2991-3007.
    6. Nadine Fabritz & Oliver Falck & Julio C. Saavedra, 2016. "Doing Business in Croatia," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 17(1), pages 52-55, April.
    7. repec:kap:regeco:v:53:y:2018:i:3:d:10.1007_s11149-018-9356-z is not listed on IDEAS
    8. World Bank Group, 2017. "Global Economic Prospects, January 2017," World Bank Publications, The World Bank, number 25823, November.
    9. Karama, Dalal, 2014. "Ease of Doing Business: Emphasis on Corruption and Rule of Law," MPRA Paper 58662, University Library of Munich, Germany.

    More about this item

    Keywords

    Foreign direct investment; Business regulation; Trade costs; Regulation; Doing business; F21; F23; O11;

    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
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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