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

Author

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  • Sadeghi, Pegah
  • Shahrestani, Hamid
  • Kiani, Kambiz Hojabr
  • Torabi, Taghi

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

  • Sadeghi, Pegah & Shahrestani, Hamid & Kiani, Kambiz Hojabr & Torabi, Taghi, 2020. "Economic complexity, human capital, and FDI attraction: A cross country analysis," International Economics, Elsevier, vol. 164(C), pages 168-182.
    • Handle: RePEc:eee:inteco:v:164:y:2020:i:c:p:168-182
    DOI: 10.1016/j.inteco.2020.08.005
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    Cited by:

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    2. Wajid Ali & Ambiya & Devi Prasad Dash, 2023. "Examining the Perspectives of Gender Development and Inequality: A Tale of Selected Asian Economies," Administrative Sciences, MDPI, vol. 13(4), pages 1-21, April.
    3. Rafei, Meysam & Esmaeili, Parisa & Balsalobre-Lorente, Daniel, 2022. "A step towards environmental mitigation: How do economic complexity and natural resources matter? Focusing on different institutional quality level countries," Resources Policy, Elsevier, vol. 78(C).
    4. 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.
    5. Soyyiğit Semanur & Michalski Bartosz, 2022. "The Economic Complexity of the Visegrád Countries and the Role of Trade with Germany," Central European Economic Journal, Sciendo, vol. 9(56), pages 219-236, January.
    6. Gnangnon, Sèna Kimm, 2022. "Effect of the utilization of non-reciprocal trade preferences offered by the QUAD countries on beneficiary countries' economic complexity," Journal of the Japanese and International Economies, Elsevier, vol. 65(C).
    7. Sèna Kimm Gnangnon, 2022. "Does poverty deter foreign direct investment flows to developing countries?," International Journal of Economic Policy Studies, Springer, vol. 16(1), pages 297-330, February.
    8. Nguyen, Canh Phuc, 2021. "Gender equality and economic complexity," Economic Systems, Elsevier, vol. 45(4).
    9. 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.
    10. Gnangnon, Sèna Kimm & Iyer, Harish, 2021. "Effect of Aid for Trade and Foreign Direct Investment Inflows on the Utilization of Unilateral Trade Preferences offered by the QUAD countries," EconStor Preprints 238211, ZBW - Leibniz Information Centre for Economics.
    11. Jiangling Yu & Feng Ju & Muhammad Wahab & Ephraim Bonah Agyekum & Clement Matasane & Solomon Eghosa Uhunamure, 2022. "Estimating the Effects of Economic Complexity and Technological Innovations on CO 2 Emissions: Policy Instruments for N-11 Countries," Sustainability, MDPI, vol. 14(24), pages 1-15, December.
    12. Edouard Mien, 2023. "Statistical Overview and Empirical Literature on Foreign Direct Investment in Developing Countries WP326," Working Papers hal-04123985, HAL.

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    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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