Bureaucratic Quality and FDI Inflows Nexus: A South Asian Perspective

Adeel Ahmad Dar, Taj Muhammad () and M. Wasif Siddiqi ()
Additional contact information
Taj Muhammad: Department of Economics, GCU, Lahore, Pakistan.
M. Wasif Siddiqi: Department of Economics, GCU, Lahore, Pakistan.

Journal for Economic Forecasting, 2020, issue 3, 149-168

Abstract: The traditional factors are important for decision making process of multinationals to invest in host countries, but in developing countries transaction costs result in coordination failures. In this regard, an efficient bureaucracy is pivotal for reducing transaction costs and, thus, for promoting human interactions. For this purpose, this study has examined the relationship between bureaucratic quality and FDI inflows for selected South Asian countries (Pakistan, India, Sri Lanka and Bangladesh) during the time period 1995-2015 by controlling domestic investment, economic development, human capital, exchange rate, financial development and inflation. Using Driscoll and Kraay robust standard errors approach, the results are consistent with the economic theory of bureaucracy and FDI inflows. The study concludes that bureaucratic quality plays an important role in attracting FDI inflows to South Asia. On the basis of these estimates, this study recommends strong and efficient bureaucratic structure that imposes strong enforcement mechanism (without interrupting government policies) which may overcome the domestic coordination failures and promote new economic activities which attract multinational companies to South Asia.

Keywords: bureaucratic quality; foreign direct investment; economic development; human capital and panel data model (search for similar items in EconPapers)
JEL-codes: C23 F21 H83 J24 O10 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.ipe.ro/rjef/rjef3_20/rjef3_2020p149-168.pdf

Related works:
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:rjr:romjef:v::y:2020:i:3:p:149-168

Access Statistics for this article

Journal for Economic Forecasting is currently edited by Lucian Liviu Albu and Corina Saman

More articles in Journal for Economic Forecasting from Institute for Economic Forecasting Contact information at EDIRC.
Bibliographic data for series maintained by Corina Saman ( this e-mail address is bad, please contact ).