FDI, Regulations and Growth

Matthias Busse and José Groizard

No 6, Proceedings of the German Development Economics Conference, Berlin 2006 from Verein für Socialpolitik, Research Committee Development Economics

Abstract: The 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. We 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, we 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: Multinationals; Spillovers; Institutions; Development (search for similar items in EconPapers)
JEL-codes: C31 F21 F43 L51 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-dev and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Working Paper: FDI, Regulations and Growth (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:gdec06:4729

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