Download Determinants of Foreign Direct Investment in Developing Countries

Determinants of Foreign
Direct Investment in
Developing Countries
Cynthia Ortega, Jamie Haime,
Francesca Ioffreda, Kyle Ragins
Factors Considered










Population
Labor Force
Literacy Rates (Education)
GDP Growth Rate
Unemployment Rate
Inflation Rate
External Debt (Risk)
Internet Users (Tech)
Freedom Index (Openness)
Percent of paved roads (Infrastructure)
Dependent Variable (Y) FDI flows
The Data Set
Country
South Korea
Malaysia
Sri Lanka
Bhutan
Phillipines
Vietnam
Cambodia
Thailand
Laos
Timor Leste
Myanmar (Burma)
Maldives
Mongolia
Bangladesh
Nepal
China
India
Japan
Jordan
Iran
Israel
Pakistan
Singapore
Ecuador
El Salvador
Foreign Direct Investment (millions) Population Labor Force (mill) Literacy Rates GDP Growth Rate Unemployment Rate Inflation Rate External Debt (bill) Internet (million) % paved
FDI
POP
LABOR
EDUCATION GROWTH
UNEMPLOYMENT INFLATION RISK
TECH
INFRA
10500
4803
529
78
2928
6739
867
9575
324
1.503
428
15
328
666
10
59899
22905
89700
1865
754
787
5333
437
178
1526
48,508,972
25,715,819
21,324,791
691,141
97,976,603
86,967,524
14,494,293
65,905,410
6,834,942
1131612
48,137,741
396,334
3,041,142
156,050,883
28,563,377
1,338,612,968
1,166,079,217
127,078,679
6,342,948
66,429,284
7,233,701
176,242,949
4,657,542
14,537,101
7,185,218
24.35
11.2
7.588
0.089
36.81
47.41
8.6
37.78
2.1
0.05
30.04
0.129
1.068
70.86
14.6
807.7
523.5
66.15
1.615
24.35
2.95
50.58
2.96
4.6
2.958
97.90%
88.70%
90.70%
47%
92.60%
90.30%
73.60%
92.60%
68.70%
58.60%
89.90%
96.30%
97.80%
47.90%
48.60%
90.90%
61%
99%
89.90%
77%
97.10%
49.90%
92.50%
91%
80.20%
2.50%
5.10%
6%
6.60%
4.60%
6.20%
6.80%
3.60%
7.50%
4.70%
0.90%
5.70%
8.90%
4.90%
5.60%
9.80%
6.60%
-0.40%
5.80%
6.50%
3.90%
5.80%
1.20%
5.90%
3.20%
3.20%
3.70%
5.20%
2.50%
7.40%
4.90%
3.50%
1.20%
2.40%
20%
9.40%
14.40%
2.80%
2.50%
46%
4%
6.80%
4.20%
12.90%
12.50%
6.10%
7.40%
2.30%
8.70%
6.30%
4.70%
5.80%
14.40%
4.90%
9.30%
24.50%
20.20%
5.50%
8.50%
7.80%
27.30%
12.80%
28%
9.40%
7.70%
6%
7.80%
1.80%
14.90%
28%
4.70%
20.80%
4.30%
8.60%
2.70%
380.5
54.11
12.99
713.3
53.48
23.72
4.317
64.8
3.179
0
7.17
477
1.6
21.72
3.285
420.8
163.8
1492
6.597
21.77
91.25
43.23
25.54
$16.96
$9.42
35.59
15.868
1
0
5.3
17.87
0
13.416
0.100
0.001
0.040
0.033
0.320
0.500
0.337
253
80
94
1.127
23
2
17.5
3.105
1.549
700,000
0.782711664
0.000160736
0.810003495
0.62
0.099001685
0.189788414
0.062890451
0.98
0.134514106
0.430463576
0.118518519
0.926315789
0.054234604
0.094998035
0.072554809
0.816127993
0.475
0.792900412
0.999480114
0.72809914
0.99608282
0.627041323
0.980993256
0.148202427
0.259691347
Economic Openness Index
OPEN
68.1
64.6
56
57.7
56.8
51
56.6
63
50.4
50.5
37.7
51.3
62.8
47.5
53.2
53.2
54.4
72.8
65.4
44.6
67.6
57
87.1
52.5
69.8
The Data Set
Brazil
Argentina
Chile
Bolivia
Peru
Guatemala
Venezuela
Honduras
Costa Rica
Cuba
Uruguay
Nicaragua
Colombia
Panama
Mexico
Dominican Republic
Algeria
Angola
Benin
Botswana
Cameroon
Chad
C™te d'Ivoire
Congo, Dem
Egypt
Ghana
Kenya
Madagascar
Malawi
Mali
South Africa
34585 198,739,269
5720 40,913,584
14457 16,601,707
204
9,775,246
5343 29,546,963
724 13,276,517
646 26,814,843
816
7,792,854
1896
4,253,877
17 11,451,652
879
3,494,382
335
5,891,199
9028 45,644,023
1825
3,360,474
24686 111,211,789
1698
9,650,054
1665 34,178,188.00
1604 12,799,293
48
8,791,832
495
1,990,876
284 18,879,301
603 10,329,208
427 20,617,068
720 68,692,542
11,578 83,082,869
855 23,832,495
728 39,002,772
997 20,653,556
55 14,268,711
360 12,666,987
6,400 49,052,489
100.9
16.27
7.32
4.457
10.2
4.054
12.49
2.892
1.957
4.962
1.641
2.322
21.3
1.392
45.5
4.119
9.44
7.288
5.38
288,400
6.716
3.747
7.035
15
24.72
11.52
16.94
7.3
4.5
5.4
18.22
88.60%
97.20%
95.70%
86.70%
92.90%
69.10%
93%
80%
94.90%
99.80%
98.00%
67.50%
92.80%
91.90%
91%
87%
69.90%
67.40%
34.70%
81.20%
67.90%
25.70%
48.70%
67.20%
71.40%
57.90%
85.10%
68.90%
62.70%
46.40%
86.40%
5.20%
7.10%
4.00%
5.60%
9.20%
3.80%
4.90%
4%
3%
4.30%
8.50%
2.00%
3.50%
8.30%
1.40%
4.50%
3%
13.20%
4.80%
3.20%
3.90%
1.70%
2.70%
8%
6.90%
6.30%
2.20%
7%
6.50%
4.20%
2.80%
8%
7.80%
7.50%
7.50%
8.40%
3.20%
8.50%
27.80%
5.60%
1.80%
7.60%
3.90%
11.80%
6.30%
4.10%
15.40%
12.90%
50%
22%
7.50%
30%
30%
45%
85%
8.70%
11%
40%
5.90%
87%
30%
21.70%
5.80%
22%
8.80%
11.50%
6.70%
12.20%
31%
11.90%
13.90%
4.20%
9.20%
20.60%
7.70%
10.60%
6.20%
12.20%
3.60%
12.50%
5.20%
12.50%
4.40%
10%
6.10%
16.70%
18%
16.40%
25.50%
9.20%
9%
2.50%
11.30%
$236.60
$135.50
64.57
4.603
$35.46
$6.34
47.99
3.602
7.401
18.25
11.48
3.214
$41.68
10.89
181.2
11.7
2.913
7.907
1.2
0.395
2.36
1.6
14.46
10
28.84
5.697
6.749
4.6
0.974
2.8
39.69
50
9.309
0.0557
0.01
7.636
1.32
5.72
424,200
1.5
1.31
0.968
0.155
12.1
0.5252
22.812
1.677
3.5
100,000
150,000
80,000
370,000
60,000
300,000
230,400
8.62
650,000
3
110,000
139,500
100,000
5.1
0.055000148
0.299999136
0.207999503
0.060004161
0.14399523
0.345015963
0.335999168
0.204044118
0.244013586
0.489993099
0.099611486
0.12077117
0.144
0.358991484
0.500001401
0.500989597
0.701999963
0.104007467
0.0875
0.325994263
0.1
0.007994012
0.08125
0.01820231
0.810003248
0.159994214
0.141199715
0.116001401
0.450197398
0.180020311
0.202999732
56.7
52.3
78.3
53.6
64.6
59.4
39.9
58.7
66.4
27.9
69.1
59.8
62.3
64.7
65.8
59.2
56.6
47
55.4
69.7
53
47.5
55
45.4
58
58.1
58.7
62.2
53.7
55.6
63.8
Summary Statistics
FDI
Mean
Standard Error
Median
Mode
Standard Deviation
Sample Variance
Kurtosis
Skewness
Range
Minimum
Maximum
Sum
Count
POP
6265.241125
2025.064862
835.5
#N/A
15154.1978
229649710.8
18.98269662
4.131066131
89698.497
1.503
89700
350853.503
56
UNEMPLOYMENT
Mean
Standard Error
Median
Mode
Standard Deviation
Sample Variance
Kurtosis
Skewness
Range
Minimum
Maximum
Sum
Count
0.146821429
0.024346339
0.0755
0.075
0.182191319
0.033193677
7.160998359
2.572110526
0.858
0.012
0.87
8.222
56
Mean
Standard Error
Median
Mode
Standard Deviation
Sample Variance
Kurtosis
Skewness
Range
Minimum
Maximum
Sum
Count
LABOR
79953514.48
31082750.39
19748184.5
#N/A
232602005.2
5.41037E+16
23.864132
4.893697891
1338216634
396334
1338612968
4477396811
56
INFLATION
Mean
Standard Error
Median
Mode
Standard Deviation
Sample Variance
Kurtosis
Skewness
Range
Minimum
Maximum
Sum
Count
0.115678571
0.009846389
0.0925
0.047
0.073683625
0.005429277
0.271384328
1.039143394
0.292
0.018
0.31
6.478
56
Mean
Standard Error
Median
Mode
Standard Deviation
Sample Variance
Kurtosis
Skewness
Range
Minimum
Maximum
Sum
Count
5188.66105
5149.324694
7.454
24.35
38534.01755
1484870509
55.99873158
7.483190075
288399.95
0.05
288400
290565.0188
56
RISK
Mean
Standard Error
Median
Mode
Standard Deviation
Sample Variance
Kurtosis
Skewness
Range
Minimum
Maximum
Sum
Count
90.41432143
31.1923092
12.345
1.6
233.4218683
54485.76858
24.51535838
4.590358279
1492
0
1492
5063.202
56
Summary Statistics
EDUCATION
Mean
Standard Error
Median
Mode
Standard Deviation
Sample Variance
Kurtosis
Skewness
Range
Minimum
Maximum
Sum
Count
0.781660714
0.024837515
0.8655
0.926
0.185866939
0.034546519
-0.017094984
-0.917584348
0.741
0.257
0.998
43.773
56
TECH
Mean
Standard Error
Median
Mode
Standard Deviation
Sample Variance
Kurtosis
Skewness
Range
Minimum
Maximum
Sum
Count
GROWTH
Mean
Standard Error
Median
Mode
Standard Deviation
Sample Variance
Kurtosis
Skewness
Range
Minimum
Maximum
Sum
Count
OPEN
0.050642857
0.003309611
0.049
0.066
0.024766861
0.000613397
1.081297937
0.510832372
0.136
-0.004
0.132
2.836
56
INFRA
60978.58671
20131.55117
6.678
0.04
150650.7343
22695643737
9.365464442
3.049276325
699999.9988
0.0012
700000
3414800.856
56
Mean
Standard Error
Median
Mode
Standard Deviation
Sample Variance
Kurtosis
Skewness
Range
Minimum
Maximum
Sum
Count
0.353528
0.041398099
0.20602181
#N/A
0.309795006
0.095972946
-0.647416589
0.843712921
0.999319379
0.000160736
0.999480114
19.797568
56
Mean
Standard Error
Median
Mode
Standard Deviation
Sample Variance
Kurtosis
Skewness
Range
Minimum
Maximum
Sum
Count
57.67857143
1.306948747
56.9
64.6
9.780308868
95.65444156
1.777227993
-0.026486404
59.2
27.9
87.1
3230
56
Regression Analysis
Regression Statistics
Multiple R
0.910586534
R Square
0.829167837
Adjusted R Square
0.804254813
Standard Error
0.957326825
Observations
56
df
Regression
Residual
Total
Intercept
LN(POP)
EDUCATION
UNEMPLOYMENT
INFLATION
LN(RISK)
LN(TECH)
LN(OPEN)
7
48
55
Coefficients
-29.73513624
0.825068091
2.203438934
-2.261006999
4.297239769
0.235159295
0.105062395
4.927431787
SS
213.5180041
43.99078323
257.5087873
Standard Error
3.822217779
0.097502203
0.850446786
0.882248277
2.01577278
0.095565982
0.030443541
0.807207346
MS
30.50257201
0.916474651
F
33.28250486
t Stat
-7.779550501
8.462045665
2.590919231
-2.562778593
2.131807618
2.460700874
3.451056995
6.104295026
Significance F
2.46744E-16
P-value
4.74936E-10
4.45156E-11
0.012640759
0.013574976
0.038168553
0.017515278
0.001174217
1.73715E-07
Model



Y(FDI) = -29.74 + 0.83(POP) + 2.20(EDU) 2.26(UNEMP) + 4.30(INFL) + 0.24(RISK) +
0.11(TECH) + 4.29(OPEN)
7 X Variables -- all statistically significant
Inflation and Risk opposite expected signs
Multicollinearity
Population
Population
Education
Education
Unemployment
Inflation
Risk
Technology
1
0.020440089
1
-0.010013954
-0.400143277
1
Inflation
0.037852795
0.121875333
0.00674991
1
Risk
0.381899072
0.40669205
-0.360606664
-0.180900641
1
Technology
0.169275035
-0.379375367
0.490140539
-0.208141981
-0.264285882
1
Openness
-0.133777392
0.219827196
-0.225659663
-0.312746276
0.130484842
0.01933454
4
Unemployment
Openness
1
Heterskedasticity

Park test resulted in the following pvalues
POP
EDU
UNEMP
INFL
RISK
TECH
OPEN
0.2498808
0.1363154
0.3257653
0.3493559
0.6372357
0.4558863
0.8573450
Conclusions

Significant correlations with between FDI and the following
variables
•
•
•
•
•
•
•


Population
Literacy Rates
Unemployment Rate
Inflation Rate
External Debt (Risk)
Internet Users (Tech)
Freedom Index (Openness)
Can’t make a statement about causality, especially with inflation
and risk, as signs are opposite expected
Future analysis might concentrate on developing an effective
model for FDI per capita and going beyond linear regressions
towards more complex relationships