Impact of Governance on FDI: Evidence from Dynamic Panel Regression Models

In: Applied Economics Quarterly, Band 66, Heft 2, S. 131-144

Abstract

This paper analyzes the effect of world governance indicators on inward foreign direct investment. The sample covers 38 developed and 82 developing countries between 2002 and 2018. The results of the system GMM regressions suggest that governance indicators are important determinants of inward FDI for developed countries. Moreover, it is shown that it is important to control for dynamic effects. In comparison, for developing countries, other country characteristics – the mean tariff rate – are more important than the institutional setting.