The impact of trade openness and business environment on foreign direct investment: A panel data of world countries from 2004 to 2012

Document Type : Research Paper

Authors

1 Associate Prof., Faculty of Economics and Administrative Science, University of Isfahan. Isfahan, Iran

2 PhD. Student in Human Resource Management, University of Isfahan, Isfahan, Iran

3 MBA in Technology Management, Kish Pardis, University of Tehran, Kish, Iran

4 MSc., Industrial Management, Tehran, Iran

Abstract

The current study examines the impact of trade openness and business environment on foreign direct investment among 23 countries in Southwest Asia over the period 2004 to 2012. The research approach is econometric and the generalized regression of panel data was used to test the effect of the variables of interest. The results show that trade openness directly (coefficient of 0.002, p-value = 0.031) determines foreign direct investment. Among the business indices, the cost of construction permits (-0.012), enforcement of contracts (-0.002), received electricity (coefficient of 0.002), the cost of starting a new business (-0.051), the time required to export (-0.154), the time required to import (-0.112) and the costs of preparing and paying taxes (0.008) showed sufficient statistical significance. The time required to import and export has the highest share for anticipation of the foreign direct investment. These results suggest that developing an appropriate model in which a convergence is found between policy institutions is a necessary issue to promote trade liberalization and improve the business environment.

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References

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