The effect of instıtutıonal varıables on fdi inflows: Evidence from upper-middle income countries

For two decades, the relationship between institutions and foreign direct investment (FDI) has been receiving a growing attention as a result of increasing economic globalization and international trade promoting democracy all over the world. In this paper, we investigate the impact of institutional variables, social, economic and political, on foreign direct investment inflows into 54 upper-middle income developing countries applying panel data regressions for the period 1995-2011. The findings suggest that the institutional variables have significant effect on FDI inflows but their impact is weaker than macoreconomic variables. Especially, the market size indicators, population growth rate, global competitiveness and international country risk play a major role in attracting FDI.