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Ease of Doing Business and Foreign Direct Investment Inflows: Evidence from Emerging Economies

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  • Padmaja Mundakkad

    (National Institute of Technology Tiruchirappalli, Tiruchirappalli, India)

Abstract

Emerging and developing countries has become major attraction for FDI inflows in recent years. Even though existing studies examine the role of host country factors in determining FDI inflows, there is only limited evidence on the role of governance and restrictions in determining FDI inflows. This paper examines the impact of Doing Business Rankings data from Ease of Doing Business report published by World Bank to account for DBR and the restrictions firms face for operating in their country. Using a panel data of 84 emerging countries from 2006 – 2018 the study examine the effect of improvement in Doing Business Rankings (DBR) on FDI inflows. The key questions examined are 1) whether ease of doing business improves the FDI inflows to the country 2) whether improvement of DBR effects FDI inflows to the country. Using Arellano-Bond dynamic panel GMM, the study suggests that improvements in doing business rankings leads to significant improvement in FDI inflows. However, large improvements in DBR does not result in attracting more FDI inflows.

Suggested Citation

  • Padmaja Mundakkad, 2021. "Ease of Doing Business and Foreign Direct Investment Inflows: Evidence from Emerging Economies," Economic Research Guardian, Weissberg Publishing, vol. 11(1), pages 47-63, June.
    • Handle: RePEc:wei:journl:v:11:y:2021:i:1:p:47-63
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    References listed on IDEAS

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    1. Asiedu, Elizabeth, 2002. "On the Determinants of Foreign Direct Investment to Developing Countries: Is Africa Different?," World Development, Elsevier, vol. 30(1), pages 107-119, January.
    2. Alberto Alesina & Silvia Ardagna & Giuseppe Nicoletti & Fabio Schiantarelli, 2005. "Regulation And Investment," Journal of the European Economic Association, MIT Press, vol. 3(4), pages 791-825, June.
    3. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
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    Cited by:

    1. Francois Cornelius Wehncke & Patricia Lindelwa Makoni & Godfrey Marozva, 2022. "Nexus Between FDI, ODA and Economic Growth in Developing African Countries: A Systems Approach," Economic Research Guardian, Weissberg Publishing, vol. 12(2), pages 97-114, December.
    2. Scalamonti, Francesco, 2024. "The foreign investments-growth nexus in underdeveloped countries: the state-of-art of research analysing a selected and recent empirical literature (2020-2022)," Technological Forecasting and Social Change, Elsevier, vol. 198(C).

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    More about this item

    Keywords

    Doing business; Foreign direct investment (FDI); Business regulations;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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