Governance and foreign direct investment in Latin America: A panel gravity model approach

Subasat, Turan; Bellos, Sotirios K.

doi:10.7764/laje.50.1.107

Cited by 55 publications

(42 citation statements)

References 36 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…More recently, the basic form of the gravity model approach has been largely developed and successfully applied to analyze the effects of institutional and policy factors on FDI inflows (e.g. Bannaga, Gangi, Abdrazak, & Al‐Fakhry, ; Bellos & Subasat, ,b; Bénassy‐Quéré, Coupet, & Mayer, ; Subasat and Bellos, ).…”

Section: Methodsmentioning

confidence: 99%

“…Although the literature generally supports the widespread idea that good institutional infrastructure and governance play a critical role in attracting FDI, some empirical studies have found conflicting results that indicate adverse effects of governance indicators on FDI inflows (see, e.g. Blonigen & Piger, 2011;Chakrabarti, 2001;Cheung and Qian, 2009;Gangi and Abdrazak, 2012;Kolstad and Wiig, 2012;Li & Resnick, 2003;Méon & Sekkat, 2004;and Okeahalam and Bah, 1998;Subasat and Bellos, 2013).…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Does good governance matter for FDI? New evidence from emerging countries using a static and dynamic panel gravity model approach

Younsi

Bechtini

2019

Econ of Transit and Inst Chang

View full text Add to dashboard Cite

This paper assesses the impact of institutional factors on foreign direct investment (FDI) attractiveness using a pool of 25 emerging host countries (ECs) for the period 1996–2012. In particular, the paper aims to examine whether higher institutional quality and good governance do improve FDI attractiveness, and thereby to identify which institutional factors are the main drivers of FDI in ECs. Using a static and dynamic panel gravity model with various estimation techniques, we find that FDI is positively and significantly influenced by political stability, government effectiveness and regulatory quality. The remaining set of governance indicators is found to be statistically significant and negatively linked to FDI. Our findings also show that factors like a larger GDP per capita difference between investing partner and ECs, higher degree of trade openness and better infrastructure have positive and significant effects on FDI attractiveness. These results have important policy implications for ECs. Fostering FDI inflows into these countries requires policymakers to improve the quality of their institutions and business climate through implementing sound economic policies and regulations.

show abstract

Section: Methodsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Does good governance matter for FDI? New evidence from emerging countries using a static and dynamic panel gravity model approach

Younsi

Bechtini

2019

Econ of Transit and Inst Chang

View full text Add to dashboard Cite

show abstract

“…One line of argument stresses that higher FDI inflows are strongly linked with good institutions (Globerman et al, 2004). In another way, Cuervo-Cazurra (2008) argues that the high costs of doing business associated with uncertainty are majorly caused by weak governance, while the more contrasting view posits that poor and bad governance system will attract more multinational companies(MNCs) to select developing economies which in turn promote growth in the respective recipient economies (Subasat and Bellos, 2013). On the other hand, the role of good institutions in the economic development process has been confirmed to be positively and significantly profound in modern economies (North, 1990;Verspagen, 2012).…”

Section: Introductionmentioning

confidence: 99%

Untitled

2019

International Journal of Business, Economics and Management

View full text Add to dashboard Cite

In sub-Saharan Africa, weak institutions and the rising concern for improved business environment offer considerable leverage for enhancing the effectiveness of institutional framework, capital inflows, and public investment efficiency. These have put SSA in the global spotlight in recent times. Hence, the study examines the mediating effect of governance on FDI-growth nexus in 35 SSA countries between 2002 and 2017 using panel data techniques (Pooled OLS, Fixed Effects, and Panel-Corrected Standard Error' (PCSE) estimation) and the Dynamic One-Step Difference and System GMM. Results indicate that control of corruption, political stability and regulatory quality, including governance composite index, have a positive and significant effect on economic growth, suggesting that institutions have a salutary impact on SSA economies. The findings further show that FDI inflows adversely influence growth owing to insufficient absorptive capacity that could enhance FDI effectiveness in the region. More importantly, the pervasiveness of poor governance in SSA is identified as a critical case that undermines the development of the nexus between FDI and economic growth. Thus, the study suggests that FDI-growth linkage would be enhanced by promoting a strong institutional environment that offers a good mechanism for attaining the actual FDI spillover potential through a policy framework that points the path towards cost-effective measures in SSA. Also, there should be core investment policies across African countries that would induce the private sector in consolidating government efforts and resources aimed at improving international competitiveness by diversifying the region's economies away from a protracted commodity-based. Contribution/Originality: The study offers a sufficient basis of analysis that amplifies and consolidates FDIgovernance-growth literature. It also addresses unresolved mixed conclusions arising from puzzling methodological issues through the use of efficient and robust estimation techniques. The paper provides a better understanding of the role of governance in FDI-growth nexus regarding Africa.

show abstract

“…Recently, some studies have specifically focused on the connection of rule of law with FDI inflow, though there is no unanimity on the nature of the nexus. For instance, Staats and Biglaiser (2012), Gammoudi and Cherif (2015), Büthe and Milner (2014), Jandhyala, (2013), Al-Khouri (2015), Jadhav (2012), Anyanwu (2012), Azam et al (2012), Karim et al (2012), Rodríguez-Pose and Cols (2017), Jeong (2014), Osabutey and Okoro (2015), Ahmad and Ahmed (2014), Gangi and Abdulrazak (2012), Hoa and Lin (2016), Lee et al (2014), Nnadi and Soobaroyen (2015), Fung and Garcia-Herrero (2012), De Beule and Duanmu (2012), Ferreira and Ferreira (2016), Różański and Sekuła (2016) and Osabuohien and Efobi (2013) have documented from their studies in various contexts that the relationship of rule of law with FDI is positively significant, insisting that improvement in the level of adherence to the rule of law stimulates FDI inflow.On the contrary,Bellos and Subasat (2012) andSubasat and Bellos (2013) reported from their analysis of selected transition economies and countries of Latin American, respectively that rule of law has an inverse relationship with FDI, arguing that lack of observance of rule of law is not an impediment, but a means of encouraging FDI inflow. On their part,Khan and Akbar (2013), Al-Khouri and Khalik (2013), Gobinda and Haider (2014), Bannaga et al (2013), Kurul and Yalta (2017) and Saidi et al (2013) concluded from their various empirical investigations that ROL has insignificant influence on the inflow of FDI.…”

mentioning

confidence: 96%

The Impact of Rule of Law on Fdi Inflow: A Pooled Mean Group Analysis of Selected Ssa Countries

Zangina

Hassan

2020

HSSR

View full text Add to dashboard Cite

Purpose of the study: The main objective of this study is basically to investigate the impact of rule of law on FDI inflow for a panel of six selected SSA countries comprising, Ethiopia, Tanzania, Senegal, Nigeria, Congo Republic, and Sudan. Methodology:The study utilized the Pooled Mean Group (PMG) dynamic heterogeneous panel approach covering the period 1996 -2017. Main Findings:The results indicate that adherence to the rule of law is directly related to the inflow of FDI in the selected countries in the long-run, whereas its impact is insignificant on FDI during the short-run. Applications of this study:The study is useful to SSA countries since it will provide policymakers with the necessary insight to formulate appropriate policies to effectively promote adherence to the rule of law with a view to boost foreign investors' confidence in the economies and stimulate the inflow of FDI.Novelty/Originality of this study: This paper is amongst the first to utilize the PMG dynamic heterogeneous panel approach to explore the relationship of rule of law with the inflow of FDI in the six SSA countries.

show abstract

Governance and foreign direct investment in Latin America: A panel gravity model approach

Cited by 55 publications

References 36 publications

Does good governance matter for FDI? New evidence from emerging countries using a static and dynamic panel gravity model approach

Does good governance matter for FDI? New evidence from emerging countries using a static and dynamic panel gravity model approach

Untitled

The Impact of Rule of Law on Fdi Inflow: A Pooled Mean Group Analysis of Selected Ssa Countries

Contact Info

Product

Resources

About