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THE SIGNIFICANCE OF INFRASTRUCTURE FOR FDI INFLOW IN DEVELOPING COUNTRIES

Yıl 2014, Cilt: 1 Sayı: 2, 1 - 16, 30.10.2014
https://doi.org/10.15637/jlecon.37

Öz

This paper assesses the importance of infrastructure availability in the host developing country in increasing its attractiveness for overseas investors. I also take into account market size, economic development, macroeconomic stability, regional and income groupings, ability of the people to speak an international language and access to sea. Using annual data for a panel of 90 developing countries over the years 1980-2007, I found that consistent with the prediction of the market size hypothesis, population is found to have a significant positive effect on inward FDI. Sound macroeconomic management proxied by exchange rate and economic development have plausible significant effects on FDI inflows, whereas, high inflation signalling economic disorder deter foreign investors. Infrastructure availability measured through telephone-density positively influence overseas investors location choice. Though, it is sensitive to alternative proxy measures but robust with respect to specification of the estimating model. Language and geographic location dummies confirm that foreign firms prefer Anglophones, and are reluctant to invest in South Asia, MENA and Francophone countries. A significant time trend is also witnessed.

Kaynakça

  • AIZENMAN, J. and SPIEGEL, M.M., 2006. Institutional Efficiency, Monitoring Costs and the Investment Share of FDI. Review of International Economics, 14(4), pp. 683-697.
  • ASIEDU, E., 2002. On the Determinants of Foreign Direct Investment to Developing Countries: Is Africa Different? World Development, 30(1), pp. 107-119.
  • ASIEDU, E., 2004. Policy Reform and Foreign Direct Investment in Africa: Absolute Progress but Relative Decline. Development Policy Review, 22(1), pp. 41-48.
  • ASIEDU, E., 2006. Foreign Direct Investment in Africa: The Role of Natural Resources, Market Size, Government Policy, Institutions and Political Instability. The World Economy, 29(1), pp. 63-77.
  • ASTERIOU, D., 2006. Applied Econometrics: A Modern Approach using EViews and Microfit. First edn. New York: Palgrave Macmillan.
  • BALASUBRAMANYAM, V.N., SAPSFORD, D. and GRIFFITHS, D., 2002. Regional Integration Agreements and Foreign Direct Investment: Theory and Preliminary Evidence. Manchester School (14636786), 70(3), pp. 460-482.
  • BALASUBRAMANYAM, V. and SAPSFORD, D., 2001. FDI and the WTO. Lancaster University Management School, Economics Department.
  • BLONIGEN, B.A., 2006. Foreign Direct Investment Behavior of Multinational Corporations. Winter 11-4. National Bureau of Economic Research Reporter.
  • BRAGA NONNENBERG, M.J. and CARDOSO MENDONCA, M.J., 2004. The Determinants of Direct Foreign Investment in Developing Countries. SSRN eLibrary, .
  • CAMPOS, N.F. and KINOSHITA, Y., 2003. Why Does FDI Go Where it Goes? New Evidence from the Transition Economies. International Monetary Fund.
  • CARR, D.L., MARKUSEN, J.R. and MASKUS, K.E., 2001. Estimating the Knowledge-Capital Model of the Multinational Enterprise. American Economic Review, 91(3), pp. 693-708. CIEŚLIK, A., 2005a. Location of Foreign Firms and National Border Effects: The Case of Poland. Tijdschrift voor Economische en Sociale Geografie, 96(3), pp. 287-297.
  • CIEŚLIK, A., 2005b. Regional Characteristics and the Location of Foreign Firms within Poland. Applied Economics, 37(8), pp. 863-874.
  • FEENSTRA, R.C., 1998. Facts and Fallacies about Foreign Direct Investment. California Davis Department of Economics.
  • HAILE, G.A. and ASSEFA, H., 2006. Determinants of Foreign Direct Investment in Ethiopia: A Time-Series Analysis. 4th International Conference on the Ethiopian Economy., 10-12 Jun 2006 2006.
  • HARMS, P. and URSPRUNG, H., 2001. Do Civil and Political Repression Really Boost Foreign Direct Investments? CESifo Working Paper No. 421. CESifo Group Munich.
  • HAUSMAN, J.A., 1978. Specification Tests in Econometrics. Econometrica, 46(6), pp. 125112
  • HOLLAND, D. and PAIN, N., 1998. The Diffusion of Innovations in Central and Eastern Europe: A Study of the Determinants and Impact of Foreign Direct Investment. NIESR Discussion Paper 137. National Institute of Economic and Social Research.
  • HSIAO, C., 2003. Analysis of Panel Data. 2nd edn. New York: Cambridge University Press.
  • KHAN, A.H. and KIM, Y.-., 1999. Foreign Direct Investment in Pakistan: Policy Issues and Operational Implications. EDRC REPORT SERIES NO. 66. Asian Development Bank. LI, Q. and RESNICK, A., 2003. Reversal of Fortunes: Democratic Institutions and Foreign Direct Investment Inflows to Developing Countries. International Organization, 57(1), pp. 175-2
  • LI, Q., VASHCHILKO, A. and VASHCHILKO, T., 2010. Interstate Political Relations and Bilateral FDI Flows. Paper prepared for presentation at the International Political Economy Society Meeting edn. Harvard University, Cambridge, Mass: .
  • LOUNGANI, P., MODY, A. and RAZIN, A., 2002. The Global Disconnect: The Role of Transactional Distance and Scale Economies in Gravity Equations. Scottish Journal of Political Economy, 49(5), pp. 526-543.
  • MASKUS, K.E., 1998. The Role of Intellectual Property Rights in Encouraging Foreign Direct Investment and Technology Transfer. Duke Journal of Comparative and International Law, 9, pp. 109-161.
  • MÁTYÁS, L., 1998. The Gravity Model: Some Econometric Considerations. The World Economy, 21 (3), pp. 397-401.
  • MORISSET, J., 2000. Foreign Direct Investment in Africa: Policies also Matter. Transnational Corporations, 9(2), pp. 107-126.
  • MORRISSEY, O., 2008. Investment Provisions in Regional Integration Agreements for Developing Countries. University of Nottingham, CREDIT.
  • NUNNENKAMP, P., 2002. Determinants of FDI in Developing Countries: Has Globalization Changed the Rules of the Game? Kiel Working Paper No.1122. Germany: Kiel Institute for the World Economy.
  • SHAH, Z. and AHMED, Q.M., 2003. The Determinants of Foreign Direct Investment in Pakistan: An Empirical Investigation. The Pakistan Development Review, 42(4), pp. 6977
  • STUDENMUND, A.H., 2006. Using Econometrics. 5th edn. Pearson Addison Wesley.
  • WINCHELL, J., 2007. Determinants of Foreign Direct Investment in Developing Countries: Bilateral Investment Treaties and Intellectual Property Rights, , Paper presented at the annual meeting of the International Studies Association 48th Annual Convention 2007, Hilton Chicago, CHICAGO, IL, USA.
  • WOOLDRIDGE, J.M., 2009. Introductory Econometrics: A Modern Approach. 4th edn. Canada: South-Western Cengage Learning.
  • XING, Y. and WAN, G., 2006. Exchange Rates and Competition for FDI in Asia. World Economy, 29(4), pp. 419-434.

THE SIGNIFICANCE OF INFRASTRUCTURE FOR FDI INFLOW IN DEVELOPING COUNTRIES

Yıl 2014, Cilt: 1 Sayı: 2, 1 - 16, 30.10.2014
https://doi.org/10.15637/jlecon.37

Öz

This paper assesses the importance of infrastructure availability in the host developing
country in increasing its attractiveness for overseas investors. I also take into account market size,
economic development, macroeconomic stability, regional and income groupings, ability of the
people to speak an international language and access to sea. Using annual data for a panel of 90
developing countries over the years 1980-2007, I found that consistent with the prediction of the
market size hypothesis, population is found to have a significant positive effect on inward FDI. Sound
macroeconomic management proxied by exchange rate and economic development have plausible
significant effects on FDI inflows, whereas, high inflation signalling economic disorder deter foreign
investors. Infrastructure availability measured through telephone-density positively influence
overseas investors location choice. Though, it is sensitive to alternative proxy measures but robust
with respect to specification of the estimating model. Language and geographic location dummies
confirm that foreign firms prefer Anglophones, and are reluctant to invest in South Asia, MENA and
Francophone countries. A significant time trend is also witnessed

Kaynakça

  • AIZENMAN, J. and SPIEGEL, M.M., 2006. Institutional Efficiency, Monitoring Costs and the Investment Share of FDI. Review of International Economics, 14(4), pp. 683-697.
  • ASIEDU, E., 2002. On the Determinants of Foreign Direct Investment to Developing Countries: Is Africa Different? World Development, 30(1), pp. 107-119.
  • ASIEDU, E., 2004. Policy Reform and Foreign Direct Investment in Africa: Absolute Progress but Relative Decline. Development Policy Review, 22(1), pp. 41-48.
  • ASIEDU, E., 2006. Foreign Direct Investment in Africa: The Role of Natural Resources, Market Size, Government Policy, Institutions and Political Instability. The World Economy, 29(1), pp. 63-77.
  • ASTERIOU, D., 2006. Applied Econometrics: A Modern Approach using EViews and Microfit. First edn. New York: Palgrave Macmillan.
  • BALASUBRAMANYAM, V.N., SAPSFORD, D. and GRIFFITHS, D., 2002. Regional Integration Agreements and Foreign Direct Investment: Theory and Preliminary Evidence. Manchester School (14636786), 70(3), pp. 460-482.
  • BALASUBRAMANYAM, V. and SAPSFORD, D., 2001. FDI and the WTO. Lancaster University Management School, Economics Department.
  • BLONIGEN, B.A., 2006. Foreign Direct Investment Behavior of Multinational Corporations. Winter 11-4. National Bureau of Economic Research Reporter.
  • BRAGA NONNENBERG, M.J. and CARDOSO MENDONCA, M.J., 2004. The Determinants of Direct Foreign Investment in Developing Countries. SSRN eLibrary, .
  • CAMPOS, N.F. and KINOSHITA, Y., 2003. Why Does FDI Go Where it Goes? New Evidence from the Transition Economies. International Monetary Fund.
  • CARR, D.L., MARKUSEN, J.R. and MASKUS, K.E., 2001. Estimating the Knowledge-Capital Model of the Multinational Enterprise. American Economic Review, 91(3), pp. 693-708. CIEŚLIK, A., 2005a. Location of Foreign Firms and National Border Effects: The Case of Poland. Tijdschrift voor Economische en Sociale Geografie, 96(3), pp. 287-297.
  • CIEŚLIK, A., 2005b. Regional Characteristics and the Location of Foreign Firms within Poland. Applied Economics, 37(8), pp. 863-874.
  • FEENSTRA, R.C., 1998. Facts and Fallacies about Foreign Direct Investment. California Davis Department of Economics.
  • HAILE, G.A. and ASSEFA, H., 2006. Determinants of Foreign Direct Investment in Ethiopia: A Time-Series Analysis. 4th International Conference on the Ethiopian Economy., 10-12 Jun 2006 2006.
  • HARMS, P. and URSPRUNG, H., 2001. Do Civil and Political Repression Really Boost Foreign Direct Investments? CESifo Working Paper No. 421. CESifo Group Munich.
  • HAUSMAN, J.A., 1978. Specification Tests in Econometrics. Econometrica, 46(6), pp. 125112
  • HOLLAND, D. and PAIN, N., 1998. The Diffusion of Innovations in Central and Eastern Europe: A Study of the Determinants and Impact of Foreign Direct Investment. NIESR Discussion Paper 137. National Institute of Economic and Social Research.
  • HSIAO, C., 2003. Analysis of Panel Data. 2nd edn. New York: Cambridge University Press.
  • KHAN, A.H. and KIM, Y.-., 1999. Foreign Direct Investment in Pakistan: Policy Issues and Operational Implications. EDRC REPORT SERIES NO. 66. Asian Development Bank. LI, Q. and RESNICK, A., 2003. Reversal of Fortunes: Democratic Institutions and Foreign Direct Investment Inflows to Developing Countries. International Organization, 57(1), pp. 175-2
  • LI, Q., VASHCHILKO, A. and VASHCHILKO, T., 2010. Interstate Political Relations and Bilateral FDI Flows. Paper prepared for presentation at the International Political Economy Society Meeting edn. Harvard University, Cambridge, Mass: .
  • LOUNGANI, P., MODY, A. and RAZIN, A., 2002. The Global Disconnect: The Role of Transactional Distance and Scale Economies in Gravity Equations. Scottish Journal of Political Economy, 49(5), pp. 526-543.
  • MASKUS, K.E., 1998. The Role of Intellectual Property Rights in Encouraging Foreign Direct Investment and Technology Transfer. Duke Journal of Comparative and International Law, 9, pp. 109-161.
  • MÁTYÁS, L., 1998. The Gravity Model: Some Econometric Considerations. The World Economy, 21 (3), pp. 397-401.
  • MORISSET, J., 2000. Foreign Direct Investment in Africa: Policies also Matter. Transnational Corporations, 9(2), pp. 107-126.
  • MORRISSEY, O., 2008. Investment Provisions in Regional Integration Agreements for Developing Countries. University of Nottingham, CREDIT.
  • NUNNENKAMP, P., 2002. Determinants of FDI in Developing Countries: Has Globalization Changed the Rules of the Game? Kiel Working Paper No.1122. Germany: Kiel Institute for the World Economy.
  • SHAH, Z. and AHMED, Q.M., 2003. The Determinants of Foreign Direct Investment in Pakistan: An Empirical Investigation. The Pakistan Development Review, 42(4), pp. 6977
  • STUDENMUND, A.H., 2006. Using Econometrics. 5th edn. Pearson Addison Wesley.
  • WINCHELL, J., 2007. Determinants of Foreign Direct Investment in Developing Countries: Bilateral Investment Treaties and Intellectual Property Rights, , Paper presented at the annual meeting of the International Studies Association 48th Annual Convention 2007, Hilton Chicago, CHICAGO, IL, USA.
  • WOOLDRIDGE, J.M., 2009. Introductory Econometrics: A Modern Approach. 4th edn. Canada: South-Western Cengage Learning.
  • XING, Y. and WAN, G., 2006. Exchange Rates and Competition for FDI in Asia. World Economy, 29(4), pp. 419-434.
Toplam 31 adet kaynakça vardır.

Ayrıntılar

Birincil Dil Türkçe
Bölüm Makaleler
Yazarlar

Mumtaz Hussain Shah Bu kişi benim

Yayımlanma Tarihi 30 Ekim 2014
Yayımlandığı Sayı Yıl 2014 Cilt: 1 Sayı: 2

Kaynak Göster

APA Shah, M. H. (2014). THE SIGNIFICANCE OF INFRASTRUCTURE FOR FDI INFLOW IN DEVELOPING COUNTRIES. Journal of Life Economics, 1(2), 1-16. https://doi.org/10.15637/jlecon.37