Emerging Economies’ Attraction of Foreign Direct Investment
33 Pages Posted: 14 Nov 2009 Last revised: 15 Mar 2012
Date Written: March 28, 2012
Abstract
This paper uses a composite measure to examine why some countries attract more foreign direct investment (FDI) than others. The measure considers all identified, measurable, and comparable socioeconomic aspects that affect FDI decisions on an aggregated country level. As a result, we can rank 127 countries with respect to their FDI attraction. The measure allows detailed strength and weakness analyses and enhances the discussion of why FDI flows are concentrated in advanced economies. Additionally, the findings reveal the areas in which emerging countries should improve in order to narrow existing gaps. Our robustness checks indicate that the composite measure accurately tracks real FDI activity.
Keywords: FDI, Country Comparison, Composite Measure, Index, Emerging Markets
JEL Classification: F15, F21, F43, O16, O57, P52, R11
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