The effects of economic freedom on inflows of foreign direct investment

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Amponsem, Frederick
University of Lethbridge. Faculty of Arts and Science
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Lethbridge, Alta : University of Lethbridge, Dept. of Economics
This thesis examines the implications of Economic Freedom (EF) for FDI inflows using the overall EF index developed by the Fraser Institute and covering the sub-components of EF including Legal System and Security of Property Rights, Access to Sound Money, Freedom to Trade Internationally, Regulation, and Size of Government. The empirical analysis is carried out through different empirical specifications and econometric strategies. The benchmark empirical results suggest that improvements in the levels of EF and in the levels of the sub-components of EF lead to increases in FDI inflows. Supplementary empirical results show that EF and the sub-components of EF do not have statistically significant implications for the effect of Domestic Investment (DI) on FDI inflows. Also, they reveal non-linear relationships between EF and FDI inflows, as well as between the sub-components of EF and FDI inflows. Finally, the empirical analysis shows that the implications of EF for FDI inflows exhibit variations across geo-economic regions.
developing countries , domestic investment , economic freedom , economic growth , foreign direct investment inflows