Does Official Development Assistance Promote Foreign Direct Investment?

[[abstract]]This study contributes to previous empirical work on the effects of ODA (Official Development Assistance) on FDI (Foreign Direct Investment) in recipient countries by using newer versions of databases. The analysis of ODA and FDI using new data is significant because some countries graduate from recipient status. This study employs panel data over 18 years for 118 countries. Our estimations use econometric methods such as ordinary least squares (OLS) and 2SLS (two-stage least squares). This study analyzes how the governance quality of a recipient country enhances the role of ODA in facilitating FDI inflows to the recipient country. The findings of this study are threefold. First, we verify that the isolated effect of ODA on FDI is positive and significant. Second, the regression results show that the isolated effect of governance enhances the ODA effect on FDI. Third, the regression results also show that the coefficient of the interaction terms between the governance and ODA per capita variables is positive and statistically significant. This implies that ODA facilitate foreign private investment only if the recipient country has a good governance system.[[notice]]補正完