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Economic complexity, human capital, and FDI attraction: A cross country analysis

Author

Listed:
  • Pegah Sadeghi
  • Hamid Shahrestani
  • Kambiz Hojabr Kiani
  • Taghi Torabi

Abstract

Foreign direct investment (FDI) inflows dynamics indicate that its new wave is efficiency-seeking and, thus, the recent literature emphasizes the host countries knowledge role and productive capabilities. This paper holds forth the new factor of economic complexity, which is an indicator of national productive capabilities and knowledge. Two proxies are used to measure the countries economic complexity, including economic complexity index (ECI) and economic sophistication (EXPY). The results indicate that economic complexity is one of the main determinants of FDI inflows with statistically and economically robust positive effects on FDI inflows to host countries. Furthermore, our findings explain why countries with equal human capital endowment have different performances in FDI attraction.

Suggested Citation

  • Pegah Sadeghi & Hamid Shahrestani & Kambiz Hojabr Kiani & Taghi Torabi, 2020. "Economic complexity, human capital, and FDI attraction: A cross country analysis," International Economics, CEPII research center, issue 164, pages 168-182.
    • Handle: RePEc:cii:cepiie:2020-q4-164-10
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    File URL: https://www.sciencedirect.com/science/article/pii/S211070172030264X
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    Citations

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    Cited by:

    1. Rafaela Vital Caetano & António Cardoso Marques & Tiago Lopes Afonso, 2024. "Can Sustainable Development Induce Foreign Direct Investment? Analysis of the Complex Inward and Outward Flows of Investment in European Union Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(2), pages 9756-9783, June.
    2. Yeung, Hak & Huber, Jürgen, 2024. "Has China's belt and road initiative positively impacted the economic complexity of host countries? Empirical evidence," Structural Change and Economic Dynamics, Elsevier, vol. 69(C), pages 246-258.
    3. Philippe Le Houérou & Hans Peter Lankes, 2023. "Mustering the private sector for development and climate in the Global South. Is it realistic? WP323," Working Papers hal-04123874, HAL.
    4. Valentine Soumtang Bime & Dieudonné Mignamissi & Agathe Cassandra Koumis Ngagni, 2024. "Does financial openness matter for economic transformation in sub-Saharan Africa?," Economic Change and Restructuring, Springer, vol. 57(2), pages 1-49, April.
    5. Nathapornpan Uttama & Popkarn Arwatchanakarn, 2023. "How do economic complexity and productive capacities foster foreign direct investment flows? Evidence from the Asian economies," Economics Bulletin, AccessEcon, vol. 43(1), pages 629-643.
    6. Balsalobre-Lorente, Daniel & Contente dos Santos Parente, Clara & Leitão, Nuno Carlos & Cantos-Cantos, José María, 2023. "The influence of economic complexity processes and renewable energy on CO2 emissions of BRICS. What about industry 4.0?," Resources Policy, Elsevier, vol. 82(C).
    7. Amir Rahman & Rafi Farooq & Khalid Ashraf Chisti, 2023. "Linear and non-linear linkage between human capital and foreign direct investment inflows into APEC countries: an evidence from panel data," SN Business & Economics, Springer, vol. 3(7), pages 1-25, July.
    8. Ul-Durar, Shajara & Arshed, Noman & Anwar, Awais & Sharif, Arshian & Liu, Wei, 2023. "How does economic complexity affect natural resource extraction in resource rich countries?," Resources Policy, Elsevier, vol. 86(PB).
    9. Sena Kimm Gnangnon, 2022. "Effect of economic complexity on services export diversification: do foreign direct investment inflows matter?," International Journal of Development Issues, Emerald Group Publishing Limited, vol. 21(3), pages 413-437, June.
    10. Edouard Mien, 2023. "Statistical Overview and Empirical Literature on Foreign Direct Investment in Developing Countries WP326," Working Papers hal-04123985, HAL.

    More about this item

    Keywords

    Economic complexity; Economic sophistication; FDI; Human capital;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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