Nexus between Ease of Doing Business and Foreign Direct Investment: Evidence from 130 Economies

Abstract

Based on both yearly data of 130 economies, this paper studies the association between the ease of doing business and FDI from three characteristics, i.e., internationalization, legalization, and facilitation. The results demonstrate that the ease of doing business and its three characteristics, i.e., internationalization, legalization, and facilitation all have a statistical positive influence in attracting FDI inflows. Second, this paper finds that in the legalization of doing business, the resolving insolvency indicator is the most statistically positive on attracting FDI, and in the facilitation of doing business, the paying taxes indicator plays an essential role in attracting FDI. Third, this paper finds that the ease of doing business has a vital impact on FDI inflows in developing countries, but not significant for developed countries. The implications of this paper are helpful for local governments optimizing their business environment to attract FDI.

Keywords

• investments
• business machines
• international trade