International Economics

<< N°164

Issue Q4 2020  
Economic complexity, human capital, and FDI attraction: A cross country analysis  
Pegah Sadeghi
Hamid Shahrestani
Kambiz Hojabr Kiani
Taghi Torabi
Foreign direct investment (FDI) inflows dynamics indicate that its new wave is efficiency-seeking and, thus, the recent literature emphasizes the host countries knowledge role and productive capabilities. This paper holds forth the new factor of economic complexity, which is an indicator of national productive capabilities and knowledge. Two proxies are used to measure the countries economic complexity, including economic complexity index (ECI) and economic sophistication (EXPY). The results indicate that economic complexity is one of the main determinants of FDI inflows with statistically and economically robust positive effects on FDI inflows to host countries. Furthermore, our findings explain why countries with equal human capital endowment have different performances in FDI attraction.

Economic complexity ; Economic sophistication ; FDI ; Human capital ; Keywords
F16 ; F21 ; F40 ; C23 ; JEL classification
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