Economic Freedom and Foreign Direct Investment: A Cross-Country Empirical Analysis

Leandro Jorge Yacoubian and George Harrison FERREIRA de Carvalho
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Leandro Jorge Yacoubian: Universidad Nacional de Córdoba, Argentina
George Harrison FERREIRA de Carvalho: Faculdade de Brasília, Brazil

CECCAR Business Review, 2025, vol. 2025, issue 9, 54-62

Abstract: This study tests whether higher economic freedom attracts more foreign direct investment (FDI), using 2023 data from 30 countries ranked by Heritage Foundation scores. Spearman’s rank correlation shows that none of the correlations in the Top, Middle, or Bottom groups are statistically significant. The Top 10 countries display a near-zero result (ρ = –0.01818, p = 0.96024), while the other groups show moderate but insignificant negatives. For the full sample, the weak positive value (ρ = 0.0367, p = 0.8473) may reflect Simpson’s paradox. Outliers such as Ireland and the Netherlands suggest that FDI often reflects tax strategies rather than institutional quality.

Keywords: economic freedom; foreign direct investment; institutional quality; cross-country analysis; Heritage Index (search for similar items in EconPapers)
JEL-codes: C21 F21 H11 O43 P51 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ahd:journl:v:2025:y:2025:i:9:p:54-62

DOI: 10.37945/cbr.2025.09.06

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