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A sectoral analysis of institutional quality and foreign direct investment in Mena countries: does sector type matter?

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  • Brahim Bergougui

    (Center for Research in Applied Economics for Development (CREAD)
    National School of Statistics and Applied Economics (ENSSEA))

  • Syed Mansoob Murshed

    (Erasmus University Rotterdam (EUR)
    Coventry University)

Abstract

We examine the institutional quality (IQ) and foreign direct investment (FDI) nexus across 10 Middle Eastern and North African (MENA) countries from 1990 to 2018 based on disaggregated FDI data in the primary (extractive), secondary (manufacturing) and tertiary (service) sectors. There is prima facie evidence that IQ plays an important role in determining FDI at the aggregate level in the MENA region. Once we use sectoral FDI flows data, IQ is irrelevant to FDI inflows into the primary sector. Four aspects of IQ: rule of law index, accountability index, property rights and the aggregate IQ index, however, significantly impact secondary and tertiary FDI inflows into the MENA region, while corruption only plays a significant part in reducing FDI in the tertiary sector. Improving IQ is thus key to attracting more manufacturing and service sector FDI.

Suggested Citation

  • Brahim Bergougui & Syed Mansoob Murshed, 2023. "A sectoral analysis of institutional quality and foreign direct investment in Mena countries: does sector type matter?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 159(4), pages 987-1012, November.
    • Handle: RePEc:spr:weltar:v:159:y:2023:i:4:d:10.1007_s10290-022-00486-x
    DOI: 10.1007/s10290-022-00486-x
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