TY - JOUR
T1 - Investment, trade openness and foreign direct investment
T2 - Social capability matters
AU - Kim, Dong Hyeon
AU - Lin, Shu Chin
AU - Suen, Yu Bo
N1 - Funding Information:
The authors are grateful to Bruce E. Hansen for sharing the GAUSS code. The third author is grateful to the financial support from the National Science Council in Taiwan under contract NSC99-2410-H-156-00 . The usual disclaimer applies.
PY - 2013/4
Y1 - 2013/4
N2 - This paper investigates whether the impacts of trade and foreign direct investment (FDI) on domestic investment depend upon social capability of a country. Applying the instrumental variable threshold regressions approach to cross-sectional data for 85 countries, it finds that social capability such as human capital, financial development, and political institutions defines the impacts of trade and FDI on domestic investment. Particularly, trade adversely affects investment in low-human-capital, less-financially-developed, or more-corrupted countries, but positively affects it in countries with opposite attributes. In contrast, FDI has a positive effect on investment in countries with low human capital, less-developed financial sectors, or high corruption, but a negative impact in countries with opposite attributes.
AB - This paper investigates whether the impacts of trade and foreign direct investment (FDI) on domestic investment depend upon social capability of a country. Applying the instrumental variable threshold regressions approach to cross-sectional data for 85 countries, it finds that social capability such as human capital, financial development, and political institutions defines the impacts of trade and FDI on domestic investment. Particularly, trade adversely affects investment in low-human-capital, less-financially-developed, or more-corrupted countries, but positively affects it in countries with opposite attributes. In contrast, FDI has a positive effect on investment in countries with low human capital, less-developed financial sectors, or high corruption, but a negative impact in countries with opposite attributes.
KW - Foreign direct investment
KW - Instrumental variable threshold regressions
KW - Investment
KW - Social capability
KW - Trade openness
UR - http://www.scopus.com/inward/record.url?scp=84872015413&partnerID=8YFLogxK
U2 - 10.1016/j.iref.2012.08.008
DO - 10.1016/j.iref.2012.08.008
M3 - Article
AN - SCOPUS:84872015413
VL - 26
SP - 56
EP - 69
JO - International Review of Economics and Finance
JF - International Review of Economics and Finance
SN - 1059-0560
ER -
