THE EFFECT OF TRANSPORTATION INFRASTRUCTURE ON FOREIGN DIRECT INVESTMENT ATTRACTION IN IRAN

Abstract

Weak transportation infrastructure in developing countries, e.g. Iran, presents a big obstacle to foreign direct investment attraction. One way of increasing the flow of foreign direct investment into a country is decreasing the production costs through expanding facilities as well as employing higher technology level. Thus, transportation cost usually is high in these countries and industries are often concentrated in regions with more improved transportation system. The present study aimed to investigate the effect of transportation infrastructure in Iran on foreign direct investment attraction. Hence, the researchers employed Johansen Juselius econometrics method to quantify the short run and long run effect of transportation infrastructure, trade intensity, and market size on foreign direct investment attraction during 1974- 2007. The results emerging from the present study indicated that transportation infrastructure did not affect foreign direct investment attraction in short run, but in long run, it had positive and significant effect on foreign direct investment attraction.

Keywords

• Transportation infrastructure, Foreign Direct Investment, Iran.

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