Foreign direct investment, regulations, and growth

Matthias Busse and José Groizard

No 3882, Policy Research Working Paper Series from The World Bank

Abstract: This paper explores the linkage between income growth rates and foreign direct investment (FDI) inflows. So far the evidence is rather mixed, as no robust relationship between FDI and income growth has been established. The authors argue that countries need a sound business environment in the form of good government regulations to be able to benefit from FDI. Using a comprehensive data set for regulations, they test this hypothesis and find evidence that excessive regulations restrict growth through FDI only in the most regulated economies. This result holds true for different specifications of the econometric model, including instrumental variable regressions.

Keywords: Public Sector Regulation; Regulatory Regimes; Achieving Shared Growth; Economic Theory&Research; Foreign Direct Investment (search for similar items in EconPapers)
Date: 2006-04-01
New Economics Papers: this item is included in nep-dev
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Citations: View citations in EconPapers (20)

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Journal Article: Foreign Direct Investment, Regulations and Growth (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:3882

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