A sectoral analysis of institutional quality and foreign direct investment in Mena countries: does sector type matter?

Brahim Bergougui*, Syed Mansoob Murshed

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

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Abstract

We examine the institutional quality (IQ) and foreign direct investment (FDI) nexus across 10 Middle Eastern and North African (MENA) countries from 1990 to 2018 based on disaggregated FDI data in the primary (extractive), secondary (manufacturing) and tertiary (service) sectors. There is prima facie evidence that IQ plays an important role in determining FDI at the aggregate level in the MENA region. Once we use sectoral FDI flows data, IQ is irrelevant to FDI inflows into the primary sector. Four aspects of IQ: rule of law index, accountability index, property rights and the aggregate IQ index, however, significantly impact secondary and tertiary FDI inflows into the MENA region, while corruption only plays a significant part in reducing FDI in the tertiary sector. Improving IQ is thus key to attracting more manufacturing and service sector FDI.

Original languageEnglish
Pages (from-to)987-1012
Number of pages26
JournalReview of World Economics
Volume159
Issue number4
DOIs
Publication statusPublished - 23 Nov 2022

Bibliographical note

Funding Information:
JM's doctoral research is funded through an Oxford-AstraZeneca Studentship. The Studentship is administered and paid out by the Oxford Internet Institute. There have been no financial transactions between AstraZeneca and JM or LF.

Publisher Copyright:
© 2022, The Author(s) under exclusive licence to Kiel Institute for the World Economy.

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