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

Year 2012, Volume: 4 Issue: 2, 153 - 161, 01.12.2012

Manijeh Taghilou Barzelaghi Monireh Dizaji Mina Mahjoub Laleh

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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