FDI Determinants Revisited: Extensive Evidence

Oana Popovici, Adrian Cantemir Calin, Diana Ivana and Sorin Dan
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Diana Ivana: Babeş-Bolyai University, Department of Economics and Business Administration in German Language, Cluj-Napoca, Romania
Sorin Dan: Innovation and Entrepreneurship InnoLab, University of Vaasa, Vaasa, Finland.

Journal for Economic Forecasting, 2021, issue 4, 103-123

Abstract: This paper revisits foreign direct investment determinants in the last two decades on a large sample of countries with different economic backgrounds by using fixed effects panel data analysis. The data sample consists of 97 countries, which are further divided into three categories in order to evaluate the differences in determinants based on the level of economic development. The models are constructed for two time periods (1997-2017 and 2008-2017) to assess whether there are shifts in factors enhancing inward FDI inflows following the economic crisis of 2007 and to take into account the impact of technological endowments and human capital on attracting FDI. The results indicate that trade openness is the most significant factor in enhancing FDI flows during 1997-2017 for the whole sample of countries. The most significant differences reveal that high-income countries are attractive due to their prospects for growth and infrastructure development, while middle-income countries are assessed by investors in a first phase by the quality of their institutions and after that, by the stability of their macroeconomic environments. The most important FDI determinants in low-income countries are trade openness and highly educated labour force.

Keywords: foreign direct investment; panel data analysis; location determinants (search for similar items in EconPapers)
JEL-codes: C33 F23 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:rjr:romjef:v::y:2021:i:4:p:103-123

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