Determinants of Foreign Direct Investment in Middle-Income Countries: New Middle-Income Trap Evidence

Tampakoudis Ioannis A., Subeniotis Demetres N., Skouloudakis Manolis I. and Kroustalis Ioannis G.
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Tampakoudis Ioannis A.: School of Business of Business Administration, Department of Business Administration, University of Macedonia, Thessaloniki, Greece
Skouloudakis Manolis I.: School of Business Administration, Department of Business Administration, University of Macedonia, Thessaloniki, Greece
Kroustalis Ioannis G.: School of Economic and Regional Studies, Department of Balkan, Slavic and Oriental Studies, University of Macedonia, Thessaloniki, Greece

Mediterranean Journal of Social Sciences, 2017, vol. 8, issue 1, 58-70

Abstract: The determinants of FDI have been examined extensively in the literature; however, the empirical findings are inconclusive and often diverging. Developing and emerging countries have attracted the bulk of FDI inflows since the early 2000s, subsequently improving their economic level. Nevertheless, many middle-income countries got stuck in the middle-income trap, failing to make the transition to the high-income level. The study investigates the effects of certain determinants on FDI inflows to middle-income countries, with respect to avoiding the middle-income trap. We employ a panel data analysis for fifteen middleincome countries gathering data from 1980 onwards. The results highlight the significance of trade openness, GDP and population growth on inward FDI, while financial development, inflation, infrastructure and fuel exports are found to be insignificant. Empirical findings may force governments to apply policies in certain areas, with the aim of attracting further FDI while at the same time escaping the middle-income trap.

Keywords: FDI; MNE; middle-income trap; panel data (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:mjsosc:v:8:y:2017:i:1:p:58-70:n:63

DOI: 10.5901/mjss.2017.v8n1p58

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