Foreign Direct Investment and Economic Growth: The Importance of Institutions and Urbanization

We use a panel data of 23 developing countries from 1976 through 1997 to analyze factors determining foreign direct investment. We also provide a statistical analysis of the relationship between economic growth and the inflow of FDI. In Section II we use time-series data to analyze the statistical relationship between the real gross domestic product (GDP) and real FDI for China and 23 developing countries. In Section III we use panel data of 23 developing countries to analyze factors determining FDI. In Section IV we analyze the disparity between the coastal and western region using China's provincial and municipal data. Conclusions are drawn in Section V.