An Empirical Analysis on the Effects of Corruption, International Trade, and National Income on Inward Foreign Direct Investment

Abstract

Purpose - The study centers on how corruption, national income, and international trade volume can give an impact on a nation’s performance in terms of Foreign Direct Investment (FDI). Design/Methodology/Approach - We used the data of Foreign Direct Investment (FDI) using Corruption Perception Index(CPI) from 217 countries and inward FDI using Panel Regression Analysis such as the Fixed Effect Panel Model and the deviation from mean model. Findings - As the empirical results of this study, the members of the OECD and EU corruption did not give the significant impact on their inbound FDI. However, there were correlations between corruption and FDI for the developing nation in ASEAN and UNASUR. In further development of globalization, corruptions of each nation are no longer domestic issues but are rather shared by the world, including neighboring countries. Research Implications - Global investors are calling for a higher level of transparency from investment destinations. Nowadays, the developing country’s effort to root out corruption has become a prerequisite condition to beef up its economy.