The Determinants of Foreign Direct Investments: Sensitivity Analyses of Cross‐Country Regressions
Abstract
A vast empirical literature has used ad hoc linear cross‐country regressions to search for the determinants of FDI. The literature is extensive and controversial. Can policy‐makers use this body of research to learn anything that can help them stimulate FDI? The author uses Extreme Bound Analysis (EBA) to examine if any of the conclusions from the existing studies is robust to small changes in the conditioning information set. The EBA upholds the robustness of the correlation between FDI and market‐size, as measured by per‐capita GDP, but indicates that the relation between FDI and many of the controversial variables (namely, tax, wage, openness, exchange rate, tariff, growth, and trade balance)bare highly sensitive to small alterations in the conditioning information set. The author also studies the distribution of the estimated coefficients of the controversial explanatory variables to rank them in order of their likelihood of their being correlated with FDI.
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The control variables used are among those more consistently found to be determinants of FDI flows.
“They are also among the ones more consistently found to be determinants of FDI flows (Chakrabarti 2001).”
From Do bilateral investment treaties increase foreign direct investment to developing countries? (2005) · cites this paper as Chakrabarti 2001
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- Authors
- Chakrabarti, A.
- Affiliations
- University of Wisconsin System (US)
- Corresponding author
- Chakrabarti, Avik
- Venue
- Kyklos
- Publisher
- Wiley
- Published
- 2001-02
- Volume
- 54
- Issue
- 1
- Pages
- 89-114
- ISSN
- 0023-5962 (ISSN-L)
- 1467-6435
- OpenAlex
- W2112836762
- Cited by
- 1,073
- References
- 0
- Citations by year
- 2026: 25 · 2025: 21 · 2024: 27 · 2023: 46 · 2022: 43 · 2021: 54 · 2020: 51 · 2019: 59 · 2018: 53 · 2017: 67 · 2016: 56 · 2015: 53 · 2014: 69 · 2013: 54 · 2012: 68
- FWCI
- 59.87
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- Kyklos (publishedVersion)
- Topics
- Social Sciences › Business, Management and Accounting › Strategy and Management › International Business and FDI
- Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Global trade and economics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Economic Growth and Productivity
- Keywords
- foreign direct investment, determinants of FDI, sensitivity analysis, market size, GDP per capita, tax policy, wage determinants, trade openness, exchange rates, tariffs, economic growth, trade balance, FDI policy
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