Determinants of Foreign Direct Investment (A Case Study for Iran)

Abstract

Foreign Direct investment is at the cutting edge of economic growthand development, filling the saving - investment gap and providingcountries with both technology and modern techniques ofmanagement. The article, here, deals with striking factors whichaffected FDI in Iran through ١٩٥٩ – ٢٠٠٣.The results of the studies approved that FDI depends on: capitalrecovery rate, political rights, infrastructures, natural resourceavailability, corruption and bureaucratic red tape, human capital,inflation, exchange and tax rate, market expansion, economic growth,productivity, domestic investment and openness of the economy. Theevaluation of the presented model shows that: ١) natural resourceavailability, human capital and infrastructures have a direct andpositive impact on FDI in Iran, ٢) political rights and dummyvariables of Islamic republic of Iran have affected Iran's FDIsignificantly as well as conversely, and ٣) openness of the economyhas positive and insignificant influences and the ratio of governmentexpenditure to GDP has insignificantly and indirectly affected FDI.

Keywords

• foreign direct investment
• political rights
• domestic investment
• human capital
• infrastructure
• natural resources