Discussion Paper

No. 2015-62 | September 15, 2015
Institutions and Investment in South and East Asia and Pacific Region: Evidence from Meta-Analysis
(Published in Special Issue Meta-Analysis in Theory and Practice)


Given the important role inward FDI can play in accelerating economic growth and transformation, developing countries are interested in attracting it. This study contributes to evidence-based policy making and to academic research on governance FDI relationship by meta synthesising 771 estimates from 48 empirical studies published from 1980 to 2012. In comparison to less regulated and high corrupt countries meta-regression results show that countries with high regulation and low levels of corruption are able to attract more FDI. Countries with stronger legal systems are positively related to inward FDI. As expected, aggregate governance is found to have a positive effect on inward FDI.

JEL Classification:

F2, F3, F4


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Cite As

Denise Donna Hawkes and Sridevi Yerrabati (2015). Institutions and Investment in South and East Asia and Pacific Region: Evidence from Meta-Analysis. Economics Discussion Papers, No 2015-62, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2015-62

Comments and Questions

Anonymous - Referee Report 1
October 27, 2015 - 10:50

See attached file

Sridevi Yerrabati and Denise Donna Hawkes - Reply to Referee Report and Revised Version
January 08, 2016 - 10:25

General issues
1. I cannot find Table 2.3 and Appendix 2.6 as you mentioned in the paper. These tables may help the readers to understand the results more clearly – We have removed the tables earlier on purpose but forgot to remove the references from the text. Hence, these two ...[more]

... references are now removed.
2. On page 3, what does the ‘governance-growth effects’ mean? – This word have been re-written as the effect of governance on growth.
3. The funnel plots of voice and accountability are not presented in Figures 2.2 and 2.3. – This measure of governance/institution has very few observations. Hence we did not present funnel and chronological order of estimates graphs.
More specific points
1. The authors do not adequately describe any reason behind the focus in East and South Asia and Pacific countries. At the beginning of the paper, the motivation of this paper should be discussed – In page1, we have added the motivation behind the thesis.
2. The key objective of meta-analysis technique is to explore and identify the factors that drive the heterogeneity in reported estimates. The different measures of institutions may be an important source of variation in empirical results. Should dummy variables of institutions be included in the same regression? Hence, this framework could investigate of the effects of variations in measures of institutions on FDI inflows – In order to synthesise the effect of governance measures on growth, we delved deeper into the sub measures of each measure of governance to synthesise them based on the common sub measures. After observing the individual variables (representative sources) that have been used in measuring governance by these different data sources, we have classified governance into 7 measures based on World Wide governance measures. We are working on a different paper to explore the issue of heterogeneity in measuring governance.
3. Since there are a few frameworks and specifications that can be done in meta-analysis, have the following estimations been considered or undertaken?
3.1 Precision-effect estimate with standard error (PEESE)? – Yes.
3.2 The relationship from studies that focus on a single country? - We have looked at this and this factor proved to be insignificant.
3.3 The relationship from only published studies? This concerns is related to the control for study quality. – We have included both published and unpublished studies in our meta-analysis. However, this factor did not come up to be significant.
4. Due to a possibility on “endogeneity” issue, the current results might lead to the endogeneity bias. This issue should be tested and addressed correctly – while we believe that correcting for endogeneity can have substantial effect on the estimates. We would like to explore this issue in a different paper. In the limitations part of the part, we have stated that the paper has not corrected for endogeneity.
5. There is still need for reflection on the findings beyond the description and discussion of each finding of the regression models. Link to theory and practical implications are still missing – We have added the following information – we have linked our results to theory on page 26 - These results also confirm the growing importance of the role played by governance on investments as suggested by North (1990) and Dunnings (1980).
6. The conclusion section of the paper was weak, especially the last paragraph. More conclusions can be drawn from this study – we have made changes in the conclusion part by concluding using policy implications.