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

Birgit Meyer, Julian Donaubauer and Peter Nunnenkamp

VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy from Verein für Socialpolitik / German Economic Association

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.

JEL-codes: F21 F35 O18 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-dev, nep-int and nep-tre
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Citations: View citations in EconPapers (1)

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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 (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc15:112946

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