Investment Promotion and FDI Inflows: Quality Matters
Information asymmetries constitute a significant obstacle to capital flows across international borders, and in particular to flows of foreign investment (FDI) to emerging markets.� Many governments aim to reduce information barriers by emerging in investment promotion activities.� Despite potentially large benefits of FDI and popularity of investment promotion intermediaries (IPIs), relatively little is known about their effectiveness.� This study uses data collected through the Global Investment Promotion Benchmarking (GIPB) exercise to examine whether higher quality of IPI services translates into higher FDI inflows.� The analysis, based on information on 156 countries, suggests that countries with IPIs able to handle investor inquiries in a more professional manner and IPIs possessing higher quality Web sites tend to attract greater volume of FDI.� These results are robust to using sector-level data and instrumental variable approach.
|Date of creation:||01 Jun 2012|
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