What drives FDI policy liberalization? An empirical investigation

Arusha Cooray, Artur Tamazian and Krishna Chaitanya Vadlamannati

Regional Science and Urban Economics, 2014, vol. 49, issue C, 179-189

Abstract: Do countries compete for FDI by liberalizing policies favoring FDI? Our measure of policies favoring FDI is an event count of changes made by a country in a given year in the arena of approval procedures, sectoral restrictions, operational conditions, incentives, investment guarantees, foreign exchange, and corporate regulations to attract FDI. Using spatial econometric estimations on panel data for 148 countries over the 1992–2009 period, we find that favorable policy changes to attract FDI in one country are positively correlated with FDI policy changes elsewhere (i.e., policy changes favorable to FDI from other countries, increase the likelihood of liberalizing policies favoring FDI in the country in question). Developing countries compete more intensively among themselves for investment via liberalization of policies favoring FDI. These results are robust to alternative weighting schemes, estimation methods, sample size, and controlling for the possibility of endogeneity.

Keywords: FDI; Policy liberalization; Spatial econometrics (search for similar items in EconPapers)
JEL-codes: C26 C33 F21 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0166046214000878
Full text for ScienceDirect subscribers only

Related works:
Working Paper: What Drives FDI Policy Liberalization? An Empirical Investigation (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:regeco:v:49:y:2014:i:c:p:179-189

DOI: 10.1016/j.regsciurbeco.2014.06.008

Access Statistics for this article

Regional Science and Urban Economics is currently edited by D.P McMillen and Y. Zenou

More articles in Regional Science and Urban Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().