Aid, Infrastructure, and FDI: Assessing the Transmission Channel with a New Index of Infrastructure

Julian Donaubauer, Birgit Meyer and Peter Nunnekamp

No 144, FIW Working Paper series from FIW

Abstract: We raise the hypothesis that aid specifically targeted at economic infrastructure helps developing countries attract higher FDI inflows through improving their endowment with infrastructure in transportation, communication, energy and finance. By performing 3SLS estimations we explicitly account for dependencies between three structural equations on the allocation of sector-specific aid, the determinants of infrastructure, and the determinants of FDI. We find fairly strong and robust evidence that targeted aid promotes FDI indirectly through the infrastructure channel. In addition, aid in infrastructure appears to have surprisingly strong direct effects on FDI.

Keywords: aid effectiveness; sector-specific aid; foreign direct investment; infrastructure (search for similar items in EconPapers)
JEL-codes: F21 F35 O18 (search for similar items in EconPapers)
Pages: 35
Date: 2015-02
New Economics Papers: this item is included in nep-dev, nep-int, nep-mfd and nep-tre
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Aid, Infrastructure, and FDI: Assessing the Transmission Channel with a New Index of Infrastructure (2016)
Working Paper: Aid, Infrastructure, and FDI: Assessing the Transmission Channel with a New Index of Infrastructure (2015)
Working Paper: Aid, infrastructure, and FDI: Assessing the transmission channel with a new index of infrastructure (2014)
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