Does foreign direct investment promote political stability? Evidence from developing economies

Okara, Assi

doi:10.1016/j.econmod.2023.106249

Cited by 13 publications

(7 citation statements)

References 79 publications

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“…Language (ex-Portuguese colonies) and geographical distance (LogGDIST) negatively correlate with Portuguese FDI inflows. These correlations are according to previous studies (Okara 2023;Luckstead et al 2023;Ly et al 2018). It is not very usual in gravity model studies to present unit root tests since there are variables such as the geographical distance constant over time and the use of dummy variables.…”

Section: Resultsmentioning

confidence: 80%

“…In this context, it is observed that recent studies by Okara (2023), Luckstead et al (2023), Bi et al (2020), Leitão (2017), andPaniagua et al (2015) chose to use only the traditional arguments of the gravity model. The article by Capoani (2023), which presents an evolutionary critique of the gravity model, also mentions that using per capita income and population variables (Linnemann 1966) to assess the market size is preferable.…”

Section: Literature Reviewmentioning

confidence: 99%

“…The article by Capoani (2023), which presents an evolutionary critique of the gravity model, also mentions that using per capita income and population variables (Linnemann 1966) to assess the market size is preferable. The studies by Leitão (2017), Bi et al (2020), andOkara (2023) apply per capita income to assess the impact of market size on FDI. Regarding questions of geographical distance, linguistic and cultural proximity, and common religion, Capoani (2023) suggests using the CEPII database since it weights distances according to population and presents available data for cultural proximity variables such as language, former colonies, and religion in bilateral terms.…”

Section: Literature Reviewmentioning

confidence: 99%

“…As previously mentioned, there are few published studies on the determinants of Portuguese FDI. However, when a meta-analysis is carried out on the subject, it is observed that the relationship between the FDI and the gravity model continues to move the interest of researchers of international business and international economics to different countries or continents (e.g., Okara 2023;Luckstead et al 2023).…”

Section: Introductionmentioning

confidence: 99%

“…The econometric results demonstrate that cultural and geographical distance, borders, former colonies, and trade agreements between European Union member countries are the main explanatory factors of inward FDI. In a complementary perspective, Okara (2023) assess the determinants of developing countries using the gravity equation and the political stability relationship, demonstrating that the political environment is an important determinant of FDI.…”

Section: Introductionmentioning

confidence: 99%

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A Gravity Model Analysis of Portuguese Foreign Direct Investment

Leitão

2023

Economies

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Cultural and linguistic affinities have been studied in international business through the gravity model and economics of language. International investment theories enable the assessment of organisational, location, and internalisation motivations. The present study assesses the impact of transport costs, common language and market size based on the arguments of the gravity model, economics of language, and international investment theory. This investigation evaluates the relationship between the Portuguese FDI and the gravity model, using panel data between 2005 and 2020. The OLS estimator, PPML-Poisson Pseudo-Maximum-Likelihood estimator, and panel quantile regressions were used as an econometric methodology. Regarding research, we sought to understand to what extent cultural and linguistic issues, namely Portuguese-speaking countries, contribute to explaining Portuguese FDI. The economic dimension of the Portuguese economy and investor countries were introduced into the regression model. In addition, transportation and transaction costs were analysed across geographical distances. The econometric results show that the common language and cultural aspects are positively correlated with the Portuguese FDI, which allows us to conclude that the Portuguese language reduces the asymmetries between the home market and the host country. When panel quantile regressions are applied, it is possible to observe that the Portuguese economy has dimension enough to attract FDI, just as the countries investing in the Portuguese economy have a return on the investment made. Finally, geographical distance negatively impacts FDI, showing that geographical proximity increases the probability of attracting FDI.

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Section: Resultsmentioning

confidence: 80%