Institutions and FDI: evidence from developed and developing countries

Financial Innovation

Table 11 Government effectiveness and FDI

Variables	Low Income Countries		Lower Middle Income Countries		High Income Countries		Upper Middle Income Countries
Variables	FEM	GMM	FEM	GMM	FEM	GMM	FEM	GMM
(lnFDI)_t − 1		0.250^a (0.000)		0.645^a (0.000)		0.305^a (0.000)		0.605^a (0.001)
Trade	0.007 (0.891)	0.083^a (0.000)	0.073^a (0.000)	0.131^a (0.000)	0.019^a (0.000)	0.020^a (0.000)	0.040 (0.362)	0.048^a (0.007)
lnMobile	-0.406 (0.214)	0.498^b (0.015)	0.120 (0.255)	0.820^a (0.000)	0.066 (0.409)	0.027 (0.816)	2.875^b (0.026)	-0.192 (0.562)
LnGDP per capita	11.889 (0.212)	25.597^a (0.001)	-1.333 (0.270)	-9.318^a (0.000)	4.311 (0.348)	4.228 (0.120)	6.774 (0.456)	7.261 (0.309)
Inflation	0.0001^c (0.067)	0.000 (0.850)	0.017 (0.331)	-0.005 (0.911)	-0.014 (0.439)	-0.023 (0.167)	0.369 (0.221)	0.211^c (0.091)
Agriculture value added	0.490^a (0.007)	0.111^b (0.013)	0.106^b (0.025)	0.155^c (0.097)	0.004 (0.898)	-0.120 (0.106)	0.254 (0.849)	0.268 (0.155)
Government effectiveness	-2.216 (0.566)	0.110^b (0.022)	1.263 (0.110)	0.155^b (0.044)	-0.737^c (0.105)	1.182^c (0.065)	0.046 (0.992)	6.371^b (0.012)
Constant	53.075 (0.357)	35.489^a (0.001)	10.454 (0.280)	7.680^a (0.000)	0.870 (0.850)	19.750^a (0.008)	9.583 (0.501)	4.752^b (0.035)
AR(1)		0.000		0.000		0.000		0.055
AR(2)		0.176		0.118		0.216		0.212
Sargan		0.334		0.664		0.385		0.326

Note: ^a, ^b and ^c denote significance at 1%, 5% and 10% level respectively. Parenthesis show P-values