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Does Institutional Quality Affect Foreign Direct Investment? A Panel Data Analysis

In: Inequality, Poverty and Development in India

Author

Listed:
  • Girijasankar Mallik

    (Western Sydney University)

  • Mamta Chowdhury

    (Western Sydney University)

Abstract

This study investigates the effects of the institutional quality along with socio-economic factors on foreign direct investment (FDI) of 156 countries using Ordinary Least Square (OLS) and Fixed Effect (FE) method. The findings of the study suggest that while corruption lowers FDI significantly, democracy, government stability, law and order, civil liberty and political rights have significant positive effects on FDI inflows. Results of the study also indicate that increased levels of educational attainment and openness in a trade regime lead to a higher level of FDI. Thus the policy prescription to attract higher FDI requires focussing on ensuring better institutional quality with a lower level of corruption along with raising the skill-base of the labour force in an outward looking external trade regime.

Suggested Citation

  • Girijasankar Mallik & Mamta Chowdhury, 2017. "Does Institutional Quality Affect Foreign Direct Investment? A Panel Data Analysis," India Studies in Business and Economics, in: Utpal Kumar De & Manoranjan Pal & Premananda Bharati (ed.), Inequality, Poverty and Development in India, chapter 0, pages 31-47, Springer.
    • Handle: RePEc:spr:isbchp:978-981-10-6274-2_2
    DOI: 10.1007/978-981-10-6274-2_2
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    Cited by:

    1. Omer Ali Ibrahim & Sonal Devesh & Mughees Shaukat, 2022. "Institutional determinants of FDI in Oman: Causality analysis framework," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(4), pages 4183-4195, October.

    More about this item

    Keywords

    Corruption; Institutional quality; Foreign direct investment; Fixed effect;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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