Effects of institutional quality on foreign direct investment inflow in lower-middle income countries

Saha, Sadhon; Sadekin, Md. Nazmus; Saha, Sanjoy Kumar

doi:10.1016/j.heliyon.2022.e10828

Cited by 18 publications

(17 citation statements)

References 40 publications

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“…The positive and statistically significant coefficient of regulatory quality indicates that higher regulatory quality is associated with increased FDI inflow. This finding aligns with the results of previous studies conducted by Kaushal (2021) and Saha et al (2022). Specifically, a one unit increase in the RQ results in a 30.4% increase in FDI inflow at the 25 th quantile, 37.3% at the 50 th quantile, and 54.5% at the 75 th quantile, indicating that the impact of regulatory quality strengthens as countries experience higher levels of FDI inflow.…”

Section: Resultssupporting

confidence: 90%

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Impact of Legal and Regulatory Qualities on Fdi Inflow: A Comparison of Developed and Developing Countries

TOPÇU

2023

DOUJ

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The objective of this research is to determine the impact of legal and regulatory qualities on foreign direct investment (FDI) inflows and explore its impact in developed and developing countries, comparatively. The sample comprises data on FDI inflows from 66 countries, spanning the period 2008 to 2021. To estimate the regression parameters, the quantile regression with fixed effects model proposed by Machado and Santos Silva (2019) was employed. Additionally, the regression results were supported using random effects and fixed effects models with Driscoll-Kraay (1998) standard errors. The results of the quantile regression analysis reveal that legal and regulatory qualities have a positively significant effect on FDI inflows. This impact is greater in developing countries than in developed countries, and the discrepancy increases with higher FDI levels. These findings hold important policy implications for decision-makers. To attract FDI, particularly in developing countries, it is crucial to strengthen legal systems by safeguarding property rights, establishing contractual certainty, and implementing effective dispute resolution mechanisms. More so, efforts should be taken to reduce rent-seeking behavior and prevent powerful groups from receiving unfair advantages. Failure to address these issues may increase the risks and impede a country's economic development in the long run.

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Section: Resultssupporting

confidence: 90%

“…OLS results also support the findings of quantile regression results. The empirical results support the findings of Kaushal (2021), Saha et al (2022), andSabir et al (2019) that legal quality has a positive impact on FDI inflow. The positive significant impact can be explained by some theoretical perspectives.…”

Section: Discussionsupporting

confidence: 84%

Impact of Legal and Regulatory Qualities on Fdi Inflow: A Comparison of Developed and Developing Countries

TOPÇU

2023

DOUJ

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“…We also control for countries’ scores on the voice and accountability index to catch variations in the host countries’ governance systems, as public objections may have an impact on the implementation of energy projects. 28 , 43 , 44 Definitions and sources of all variables are listed in Table S1 . The correlation among all variables is presented in Table S2 .…”

Section: Resultsmentioning

confidence: 99%

Empirical analysis of Chinese overseas power plant investments: Likelihood of suspensions and associated environmental risks

Lu¹,

Zhou²,

Simmons³

2023

iScience

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“…This has a dual purpose, firstly empirical, to address the issue of possible collinearity between the six subindicators of institutional quality. The second is a research interest, to conduct a comparative analysis across the different African countries in our sample in terms of institutional quality, as opposed to the majority of studies that have tackled this issue (Aristizãbal & Garcãa, 2020; Saha et al, 2022) to mobilize separate variables to assess institutional quality.…”

Section: Empirical Methodology: Data Variables and Empirical Modelmentioning

confidence: 99%

Regional convergence and catching up process in Africa: A tale of three clubs

Ibourk

Elouaourti

2023

Regional Science Policy & Practice

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The aims of this article were twofold. First, to tackle the issue of convergence from an analytical point of view by presenting the mathematical developments of the main economic growth models, which emphasized that the convergence of African economies is conditional to the investment level in the early stages of physical capital accumulation. As the latter increases, the convergence of African economies is determined by other factors (investment in research and development (R&D) and human capital, etc.). Second, to verify the empirical validity of these models by confronting them with data from 33 African economies stratified by development level over the period 2004–2019. Empirical results using both spatial and nonspatial panel estimation methodology and the ‘beta‐convergence’ approach pointed to three ‘convergence clubs,’ as well as a conditional convergence for all these clubs. However, the determinants of convergence among African economies differ by development level. In low‐income economies, convergence is conditional to financial development and inflation level. For lower‐middle‐income economies, institutional quality and inflation level contribute to the convergence of this club. The convergence of upper‐middle‐income economies is conditioned by public spending and human capital. In terms of policy implications, countries should develop measures that strengthen institutional reforms to improve the functioning of financial systems, democratic accountability, control of corruption, business climate, economic growth, strengthening the legal environment, and improving competition by reducing public expenditures. This paper is original insofar as it advances the field from the current state of knowledge in several ways. First, to stand out from the existing literature, we conducted a comparative analysis of the institutional quality levels across 33 African countries by developing an institutional quality index through the use of a principal component analysis (PCA) method. Second, we tested the empirical validity of the convergence hypothesis beneath economic growth theories and in the African context; moreover, it has verified the possible existence of ‘convergence clubs,’ then, it brought to light the main determinants of the convergence of these clubs.

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Effects of institutional quality on foreign direct investment inflow in lower-middle income countries

Cited by 18 publications

References 40 publications

Impact of Legal and Regulatory Qualities on Fdi Inflow: A Comparison of Developed and Developing Countries

Impact of Legal and Regulatory Qualities on Fdi Inflow: A Comparison of Developed and Developing Countries

Empirical analysis of Chinese overseas power plant investments: Likelihood of suspensions and associated environmental risks

Regional convergence and catching up process in Africa: A tale of three clubs

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