Investment, trade openness and foreign direct investment: Social capability matters

Dong Hyeon Kim; Shu Chin Lin; Yu Bo Suen

doi:10.1016/j.iref.2012.08.008

Investment, trade openness and foreign direct investment: Social capability matters

Dong Hyeon Kim, Shu Chin Lin, Yu Bo Suen

Research output: Contribution to journal › Article › peer-review

23 Citations (Scopus)

Abstract

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.

Original language	English
Pages (from-to)	56-69
Number of pages	14
Journal	International Review of Economics and Finance
Volume	26
DOIs	https://doi.org/10.1016/j.iref.2012.08.008
Publication status	Published - 2013 Apr
Externally published	Yes

Bibliographical note

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.

Keywords

Foreign direct investment
Instrumental variable threshold regressions
Investment
Social capability
Trade openness

ASJC Scopus subject areas

Finance
Economics and Econometrics

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1016/j.iref.2012.08.008

Cite this

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title = "Investment, trade openness and foreign direct investment: Social capability matters",

abstract = "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.",

keywords = "Foreign direct investment, Instrumental variable threshold regressions, Investment, Social capability, Trade openness",

author = "Kim, {Dong Hyeon} and Lin, {Shu Chin} and Suen, {Yu Bo}",

note = "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. ",

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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.

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KW - Instrumental variable threshold regressions

KW - Investment

KW - Social capability

KW - Trade openness

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DO - 10.1016/j.iref.2012.08.008

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SN - 1059-0560

VL - 26

SP - 56

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JO - International Review of Economics and Finance

JF - International Review of Economics and Finance

ER -

Investment, trade openness and foreign direct investment: Social capability matters

Abstract

Bibliographical note

Keywords

ASJC Scopus subject areas

UN SDGs

Access to Document

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