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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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“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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The determinants of Chinese outward foreign direct investment
Buckley, P. J., Clegg, J. L., Cross, A. R., Liu, X., Voss, H., & Zheng, P. (2007) · Journal of International Business Studies · doi:10.1057/palgrave.jibs.8400277 · Cited by 2,574
On the Determinants of Foreign Direct Investment to Developing Countries: Is Africa Different?
Asiedu, E. (2002) · World Development · doi:10.1016/s0305-750x(01)00100-0 · Cited by 1,768
Political risk, institutions and foreign direct investment
Busse, M., & Hefeker, C. (2007) · European Journal of Political Economy · doi:10.1016/j.ejpoleco.2006.02.003 · Cited by 1,606
A Review of the Empirical Literature on FDI Determinants
Blonigen, B. A. (2005) · Atlantic Economic Journal · doi:10.1007/s11293-005-2868-9 · Cited by 1,126
What determines Chinese outward FDI?
Kolstad, I., & Wiig, A. (2010) · Journal of World Business · doi:10.1016/j.jwb.2010.10.017 · Cited by 941
Metadata
- 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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