Foreign Direct Investment Determinants in OECD and Developing Countries

16 Pages Posted: 7 Jul 2017

See all articles by Fotini Economou

Fotini Economou

Independent

Christis Hassapis

University of Cyprus

Nikolaos Philippas

University of Piraeus - Department of Business Administration

Efthymios G. Tsionas

Lancaster University

Date Written: August 2017

Abstract

In this paper we examine the foreign direct investment (FDI) inflow determinants in 24 Organisation for Economic Co‐operation and Development (OECD) and 22 developing (non‐OECD) countries over 1980–2012, using the standard fixed effects as well as a dynamic panel approach. The most robust finding is that lagged FDI, market size, gross capital formation and corporate taxation significantly affect FDI inflows in OECD countries. We also examine a group of developing countries, taking into consideration the increased share of world FDI inflows that developing countries have attracted, and compare the results. In this case, lagged FDI, market size, labor cost and institutional variables provide the most robust results. The empirical results have important policy implications indicating the factors that host economies should emphasize in order to attract FDI inflows.

Suggested Citation

Economou, Fotini and Hassapis, Christis and Philippas, Nikolaos and Tsionas, Efthymios G., Foreign Direct Investment Determinants in OECD and Developing Countries (August 2017). Review of Development Economics, Vol. 21, Issue 3, pp. 527-542, 2017. Available at SSRN: https://ssrn.com/abstract=2998403 or http://dx.doi.org/10.1111/rode.12269

Fotini Economou (Contact Author)

Independent ( email )

No Address Available

Christis Hassapis

University of Cyprus ( email )

75 Kallipoleos Street
P.O. Box 20537
1678 Nicosia
Cyprus
+357-2-892116 (Phone)
+357-2-750310 (Fax)

Nikolaos Philippas

University of Piraeus - Department of Business Administration ( email )

80, Karaoli & Dimitriou, Piraueus
Athens, 18534
Greece

Efthymios G. Tsionas

Lancaster University ( email )

Lancaster LA1 4YX
United Kingdom

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