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Improvements in the World Bank's ease of doing business rankings : do they translate into greater foreign direct investment inflows ?

  • Jayasuriya, Dinuk
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    The World Bank's Ease of Doing Business reports have been ranking countries since 2006. However, do improvements in rankings generate greater foreign direct investment inflows? This study is the first to test such a proposition empirically with Arellano-Bond dynamic panel estimators using the official rankings from 2006 to 2009. The paper shows this relationship is significant for the average country. However, when the sample is restricted to developing countries, the results suggest an improved ranking has, on average, an insignificant (albeit positive) influence on foreign direct investment inflows. Although robust, this result should be taken with caution given that it refers to the average developing country using data across a four-year time period. Finally, the paper demonstrates that, on average, countries that undertake large-scale reforms relative to other countries do not necessarily attract greater foreign direct investment inflows. This analysis may have important ramifications for developing country governments wanting to improve their Doing Business Rankings in the hope of attracting foreign direct investment inflows.

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    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5787.

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    Date of creation: 01 Sep 2011
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    Handle: RePEc:wbk:wbrwps:5787
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    1. Jiangyan Yu & James P Walsh, 2010. "Determinants of Foreign Direct Investment; A Sectoral and Institutional Approach," IMF Working Papers 10/187, International Monetary Fund.
    2. Klapper, Leora & Love, Inessa, 2010. "The impact of business environment reforms on new firm registration," Policy Research Working Paper Series 5493, The World Bank.
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    5. di Giovanni, Julian, 2002. "What Drives Capital Flows? The Case of Cross-Border M&A Activity and Financial Deepening," Center for International and Development Economics Research, Working Paper Series qt7nq6d7wp, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
    6. Busse, Matthias & Groizard, Jose Luis, 2006. "Foreign direct investment, regulations, and growth," Policy Research Working Paper Series 3882, The World Bank.
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    9. Bruce A. Blonigen & Jeremy Piger, 2014. "Determinants of foreign direct investment," Canadian Journal of Economics, Canadian Economics Association, vol. 47(3), pages 775-812, August.
    10. Abdelaal Mahmoud, Ashraf, 2010. "FDI, local Financial Markets, Employment and poverty alleviation," MPRA Paper 29717, University Library of Munich, Germany.
    11. Ghosh Indradeep, 2007. "The Relation between Trade and FDI in Developing Countries -- A Panel Data Approach," Global Economy Journal, De Gruyter, vol. 7(3), pages 1-32, October.
    12. Črt Kostevc & Tjaša Redek & Andrej Sušjan, 2007. "Foreign Direct Investment and Institutional Environment in Transition Economies," Transition Studies Review, Springer, vol. 14(1), pages 40-54, May.
    13. Alfaro, Laura & Chanda, Areendam & Kalemli-Ozcan, Sebnem & Sayek, Selin, 2010. "Does foreign direct investment promote growth? Exploring the role of financial markets on linkages," Journal of Development Economics, Elsevier, vol. 91(2), pages 242-256, March.
    14. Bergstrand, Jeffrey H. & Egger, Peter, 2007. "A knowledge-and-physical-capital model of international trade flows, foreign direct investment, and multinational enterprises," Journal of International Economics, Elsevier, vol. 73(2), pages 278-308, November.
    15. Bruce Blonigen, 2005. "A Review of the Empirical Literature on FDI Determinants," Atlantic Economic Journal, International Atlantic Economic Society, vol. 33(4), pages 383-403, December.
    16. International Monetary Fund, 2010. "FDI Flows to Low-Income Countries; Global Drivers and Growth Implications," IMF Working Papers 10/132, International Monetary Fund.
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