Affiliation:
1. European Investment Bank
Abstract
Abstract
We investigate the role played by country income levels and the quality of the institutional environment in mediating the impact of FDI on growth in 111 countries, stretching from developing and emerging market to advanced economies. We find that FDI benefits do not accrue evenly across country income groups. The effect is larger for middle-income countries while we detect mixed evidence for high- and low- income countries. We make use of this first association to characterise the impact of FDI mediated by the institutional quality of countries. We uncover that institutional factors have a mediating positive effect on FDI within country income groups, whereby countries with better-developed institutions relative to their income group peers benefit more from a positive impact of FDI on growth. From a policy perspective, FDI appears a useful tool to support growth even more so when combined with a genuine reform agenda.
JEL classification: C33, F21, E02, O43, O47
Publisher
Research Square Platform LLC
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