| Peer-Reviewed

The Incidence of Economic Freedom and Foreign Direct Investment in Economic Growth: Empirical Evidence from Tunisia

Received: 14 September 2020     Accepted: 26 November 2020     Published: 26 March 2021
Views:       Downloads:
Abstract

Economic freedom is one of the most important factors in increasing economic growth. Thus, it affects the spillover effects of FDI through the improvement of the absorption capacity in the host countries. In this context, this thesis aims to study the macroeconomic impact of economic freedom on foreign direct investment inflows by basing empirical evidence for data from Tunisia over a period from 1980 to 2017. Using the famous economic method of generalized moments (GMM), the results of the estimates show that FDI positively affects economic growth and requires a high level of economic freedom, and makes it possible to increase the absorption capacity in host countries and '' attract more investors. Economic freedom increases FDI inflows to 0.098 units. More precisely, Tunisia also refers to the positive impact of economic freedom on FDI.

Published in International Journal of Health Economics and Policy (Volume 6, Issue 1)
DOI 10.11648/j.hep.20210601.13
Page(s) 23-30
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2021. Published by Science Publishing Group

Keywords

Economic Freedom, Foreign Direct Investment, Economic Growth, GMM

References
[1] FMI, F. M. I. (1993). Balance of Payments and International Investment Position Manual–Gelb, A., V. Ramachandran and G. Turner (2007), ‘Stimulating Growth and Investment in Africa: from Macro to Micro Reforms’, African Development Review, Vol. 9, No. 1, pp. 26–51.
[2] Dunning, J. (1993), Multinational Enterprises and the Global Economy, Addison-Wesley, Wokingham.
[3] Xu, B. (2000), ‘Multinational Enterprises, Technology Diffusion, and Host Country Productivity Growth’, Journal of Development Economics, Vol. 62, pp. 477–93.
[4] Kohpaiboon, Archanun. (2004). “Foreign Trade Regime and FDI-Growth Nexus: A Case Study of Thailand”, Working paper, Australian National University.
[5] Worth, Thomas. (2004). “Regional Trade Agreements and Foreign Direct Investment”, Working paper, Regional Trade Agreements and U.S. Agriculture/AER-771-77, Economic Research Service/USDA.
[6] Nath, Hiranya K. (2004). “Trade, Foreign Direct Investment and Growth: Evidence from Transition Economies”, paperprepared for the 51st Annual North American Meeting of the Regional Science Association International.
[7] Alfaro, L., A. Chanda, S. Kalemli-Ozcan and S. Sayek (2010), ‘DoesForeign Direct Investment Promote Growth? Exploring the Role of Financial Markets on Linkages’, Journal of Development Economics, Vol. 61, pp. 242–56.
[8] Blomstrom, M., R. Lipsey and M. Zejan (1994), ‘What Explain Developing Country Growth?’ in W. Baumol, N. Nelson and E. Wolff (eds.), Convergence and Productivity: Cross-National Studies and Historical Evidence, PN Oxford University Press, PLOxford.
[9] Zghidi, N., Mohamed Sghaier, I., & Abida, Z. (2016). Does economic freedom enhance the impact of foreign direct investment on economic growth in North African Countries ? A panel data Analysis. African Development Review, 28 (1), 64-74.
[10] Krugman, P. (2000), ‘Fire-sale FDI’, in S. Edwards (ed.), Capital Flows and the Emerging Economies, The University of Chicago Press, Chicago.
[11] Stiglitz, J. E. (2000), ‘Capital Market Liberalization, Economic Growth, and Instability’, World Development, Vol. 28, No. 6, pp. 1075–86
[12] Alaya. M, et al (2009) «À quelles conditions les IDE stimulent-ils la croissance?» Mondes en développement 2009/4 (n°148), p. 119-138.
[13] Aitken, B., G. Hanson and A. Harrison (1997), ‘Spillovers, Foreign Investment, and Export Behavior’, Journal of International Economics, Vol. 43, pp. 103–32.
[14] Agosin, M., & Mayer, R. (2000). Foreign direct investment: Does it crowd in domestic investment. In United Nations Conference on Trade and Development Geneva, Switzerland, Working Paper (Vol. 146).
[15] ERSOY, A. Y., & AALIOUA, M. (2018). The effect of foreign direct Investments on the economic growth of the mediterranean countries: case of turkey and morocco. Electronic Turkish Studies, 13 (14).
[16] Mohamed, S. E., & Sidiropoulos, M. G. (2010). Another look at the determinants of foreign direct investment in MENA countries: an empirical investigation. Journal of economic development, 35 (2), 75.
[17] Gwartney, J., & Lawson, R. (2003). The concept and measurement of economic freedom.
[18] Gwartney, J., Lawson, R., & Norton, S. (2008). Economic freedom of the world: 2008 annual report. The Fraser Institute.
[19] Hall, J. C., & Lawson, R. A. (2014). Economic freedom of the world: An accounting of the literature. Contemporary Economic Policy, 32 (1), 1-19.
[20] Azman-Saini, W. N. W., Baharumshah, A. Z., & Law, S. H. (2010). Foreign direct investment, economic freedom and economic growth: International evidence. Economic Modelling, 27 (5), 1079-1089.
[21] Quazi, R. (2007), ‘Economic Freedom and Foreign Direct Investment in East Asia’, Journal of the Asia Pacific Economy, Vol. 12, No. 3, pp. 329–44.
[22] Fabro, G., and J. Aixal_a (2012), ‘Direct and Indirect Effects of Economic and Political Freedom on Economic Growth’, Journal of Economic Issues, Vol. 46, pp. 1059–80.
[23] Heckelman, J. C. (2000). Economic freedom and economic growth: A short-run causal investigation. Journal of Applied Economics, 3 (1), 71-91.
[24] Sambharya, R. B., & Rasheed, A. A. (2015). Does economic freedom in host countries lead to increased foreign direct investment?. Competitiveness Review.
[25] Pearson, D., Nyonna, D., & Kim, K. J. (2012). The relationship between economic freedom, state growth and foreign direct investment in US states. International Journal of Economics and Finance, 4 (10), 140-146.
[26] Medina-Moral, E., & Montes-Gan, V. J. (2018). Economic freedom, good governance and the dynamics of development. Journal of Applied Economics, 21 (1), 44-66.
[27] Sovbetov, Y. (2017). Interaction of Economic Freedom and Foreign Direct Investment Globally: Special Cases from Neglected Regions. Journal of Economics and Financial Analysis, 1 (1), 59-80.
[28] Sooreea-Bheemul, B., Rasool, U. S., & Sooreea, R. (2020). Does Economic Freedom Matter to Foreign Direct Investment in Sub-Saharan Africa?. International Journal of Economics and Financial Issues, 10 (3), 195-207.
[29] Suleymanov, E., & Alirzayev, E. (2019). Role of Economic Freedom in Attracting Investments in the Context of Azerbaijan. International Journal of Economics and Financial Issues, 9 (1), 87-95.
[30] Singh, D., & Gal, Z. (2020). Economic Freedom and its Impact on Foreign Direct Investment: Global Overview. Review of Economic Perspectives, 20 (1), 73-90.
[31] Arslan, A., Tarba, S. Y., & Larimo, J. (2015). FDI entry strategies and the impacts of economic freedom distance: Evidence from Nordic FDIs in transitional periphery of CIS and SEE. International Business Review, 24 (6), 997-1008.
[32] Hadhek, Z., &Mrad, F. (2015). Trade Openness, Institutions and Economic Growth. European Journal of Economics, Finance and Administrative Sciences, 75, 96-104.
[33] Ezeoha, A. E., & Ugwu, J. O. (2015). Interactive impact of armed conflicts on foreign direct investments in Africa. African Development Review, 27 (4), 456-468.
[34] Arellano, M. and S. Bond (1991), ‘Some Tests of Specification for Panel Data: Monte Carlo Evidence with an Application for Employment Equations’, Review of Economic Studies, Vol. 58, pp. 277–9.
[35] Arellano, M. and O. Bover (1995), ‘Another Look at the Instrumental-Variable Estimation of Error-components Models’, Journal of Econometrics, Vol. 68, pp. 29–52.
[36] Blundell, R; & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87 (1), 115-143.
Cite This Article
  • APA Style

    Kaddachi Hayet, Ben Zina Naceur. (2021). The Incidence of Economic Freedom and Foreign Direct Investment in Economic Growth: Empirical Evidence from Tunisia. International Journal of Health Economics and Policy, 6(1), 23-30. https://doi.org/10.11648/j.hep.20210601.13

    Copy | Download

    ACS Style

    Kaddachi Hayet; Ben Zina Naceur. The Incidence of Economic Freedom and Foreign Direct Investment in Economic Growth: Empirical Evidence from Tunisia. Int. J. Health Econ. Policy 2021, 6(1), 23-30. doi: 10.11648/j.hep.20210601.13

    Copy | Download

    AMA Style

    Kaddachi Hayet, Ben Zina Naceur. The Incidence of Economic Freedom and Foreign Direct Investment in Economic Growth: Empirical Evidence from Tunisia. Int J Health Econ Policy. 2021;6(1):23-30. doi: 10.11648/j.hep.20210601.13

    Copy | Download

  • @article{10.11648/j.hep.20210601.13,
      author = {Kaddachi Hayet and Ben Zina Naceur},
      title = {The Incidence of Economic Freedom and Foreign Direct Investment in Economic Growth: Empirical Evidence from Tunisia},
      journal = {International Journal of Health Economics and Policy},
      volume = {6},
      number = {1},
      pages = {23-30},
      doi = {10.11648/j.hep.20210601.13},
      url = {https://doi.org/10.11648/j.hep.20210601.13},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.hep.20210601.13},
      abstract = {Economic freedom is one of the most important factors in increasing economic growth. Thus, it affects the spillover effects of FDI through the improvement of the absorption capacity in the host countries. In this context, this thesis aims to study the macroeconomic impact of economic freedom on foreign direct investment inflows by basing empirical evidence for data from Tunisia over a period from 1980 to 2017. Using the famous economic method of generalized moments (GMM), the results of the estimates show that FDI positively affects economic growth and requires a high level of economic freedom, and makes it possible to increase the absorption capacity in host countries and '' attract more investors. Economic freedom increases FDI inflows to 0.098 units. More precisely, Tunisia also refers to the positive impact of economic freedom on FDI.},
     year = {2021}
    }
    

    Copy | Download

  • TY  - JOUR
    T1  - The Incidence of Economic Freedom and Foreign Direct Investment in Economic Growth: Empirical Evidence from Tunisia
    AU  - Kaddachi Hayet
    AU  - Ben Zina Naceur
    Y1  - 2021/03/26
    PY  - 2021
    N1  - https://doi.org/10.11648/j.hep.20210601.13
    DO  - 10.11648/j.hep.20210601.13
    T2  - International Journal of Health Economics and Policy
    JF  - International Journal of Health Economics and Policy
    JO  - International Journal of Health Economics and Policy
    SP  - 23
    EP  - 30
    PB  - Science Publishing Group
    SN  - 2578-9309
    UR  - https://doi.org/10.11648/j.hep.20210601.13
    AB  - Economic freedom is one of the most important factors in increasing economic growth. Thus, it affects the spillover effects of FDI through the improvement of the absorption capacity in the host countries. In this context, this thesis aims to study the macroeconomic impact of economic freedom on foreign direct investment inflows by basing empirical evidence for data from Tunisia over a period from 1980 to 2017. Using the famous economic method of generalized moments (GMM), the results of the estimates show that FDI positively affects economic growth and requires a high level of economic freedom, and makes it possible to increase the absorption capacity in host countries and '' attract more investors. Economic freedom increases FDI inflows to 0.098 units. More precisely, Tunisia also refers to the positive impact of economic freedom on FDI.
    VL  - 6
    IS  - 1
    ER  - 

    Copy | Download

Author Information
  • Economic Science, Faculty of Economics and Management, University of Sfax, Sfax, Tunisia

  • Economic Science, Faculty of Economics and Management, University of Sfax, Sfax, Tunisia

  • Sections