The effects of sectoral components of GDP on FDI inflows in developing countries

In recent years, the effect of human capital on the attractiveness of foreign direct investment (FDI) has been increasing. My thesis will investigate the importance of various sectors of the economy and their ability to determine inflows of FDI. I expand upon the model presented by Noorbakhsh, Paloni, and Youseff (2001). As an extension to future research these authors suggested implementing a disaggregated approach on FDI inflows into developing countries. I pursue this by modify their model which will consist of adding new control variables such as Net Official Development Assistance (ODA), the value added from the agriculture, industrial, service, and manufacturing sectors, and domestic credit provided by the banking sector. I estimate several ordinary least squares, fixed affects, and dynamic panel models from 1980-2008. The models include data from thirty- nine developing countries ranging from Asia, Africa, and Latin America. I conclude that the sectoral components of GDP are important determinants of FDI inflows.