Foreign direct investment, regulations, and growth, Vol. 1 of 1

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Foreign direct investment, regulations, and growth

Author:	Busse, Matthias; Groizard, Jose Luis;	Collection Title:	Policy, Research working paper ; no. WPS 3882
Country:	World;	Date Stored:	2006/04/14
Document Date:	2006/04/01	Document Type:	Policy Research Working Paper
Language:	English	Region:	The World Region
Report Number:	WPS3882	SubTopics:	Achieving Shared Growth; Foreign Direct Investment; Economic Theory & Research; Regulatory Regimes; Public Sector Regulation
Volume No:	1 of 1

Summary: This paper explores the linkage between income growth rates and foreign direct investment (FDI) inflows. So far the evidence is rather mixed, as no robust relationship between FDI and income growth has been established. The authors argue that countries need a sound business environment in the form of good government regulations to be able to benefit from FDI. Using a comprehensive data set for regulations, they test this hypothesis and find evidence that excessive regulations restrict growth through FDI only in the most regulated economies. This result holds true for different specifications of the econometric model, including instrumental variable regressions.


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