Foreign Direct Investment, Economic Freedom and Institutional Quality. An empirical analysis

Héctor Rojo Domingo ()
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Héctor Rojo Domingo: Universidad de Zaragoza

Lecturas de Economía, 2025, issue 103, 13-46

Abstract: The economic success of East Asian countries has been linked to their capacity to attract Foreign Direct Investment. In a globalized world in which FDI plays a decisive role in the development and modernization process of a country, as has been seen in the Asian case, it is worth wondering about the causes that explain the attraction of FDI to a country. This paper analyzes the impact of economic freedom and institutional quality on a country's ability to attract FDI. Based on the indexes provided by Heritage Foundation and the World Bank, new synthetic indexes are constructed for each variable and their impact on inward FDI is tested for a sample of 187 countries and territories using panel data estimation. The results show the importance of economic policy, and not merely institutional, in the economic success of countries

Keywords: foreign direct investment; economic freedom; institutional quality; policy making; globalization (search for similar items in EconPapers)
JEL-codes: E61 F21 F23 F68 O43 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:lde:journl:y:2025:i:103:p:13-46

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DOI: 10.17533/udea.le.n103a356103

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