Why do specific regions attract more FDI inflows in India? Role of region-specificities and insights from the dynamic panel econometrics

Prajukta Tripathy, Pragyanrani Behera and Bikash Mishra

International Journal of Economics and Business Research, 2022, vol. 23, issue 4, 411-434

Abstract: To examine the disparity in distributional inflows of foreign direct investment (FDI), the study uses Theil index as a statistical tool to verify the skewed distribution across the regions in India and confirm the same with its decomposition scores. In order to investigate the causes of such unequal distribution of FDI inflows in India, this study uses the system GMM model for 16 regional groups from 2004 to 2015 time period. With a special concern to the region-specific factors and the agglomeration effect, the uneven dummy variables are also used to capture the inequality in FDI inflow across the regions. Our findings confirm the significant role of each of them in pocketing a major chunk of FDI inflows by a few regions. To recommend the policymakers, the present study proposes a balanced growth perspective and a comprehensive framework mitigating labour reforms, industrial productivity and FDI policy.

Keywords: foreign direct investment; FDI; regional concentration; Theil index; region-specific factors; panel data; endogeneity; system generalised method of moments; SGMM; Indian regions; India. (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijecbr:v:23:y:2022:i:4:p:411-434

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