PhD defence: Badi Ud Din

Three Essays on Institutions, Economic Growth, and Foreign Direct Investment

Jury 

Patrick Plane, Directeur de recherche CNRS-Université Clermont Auvergne
Marie-Ange Veganzones-Varoudakis, Chargée de recherche, CNRS-Université Clermont Auvergne
Ahmet Faruk Aysan, Professeur, Hamad Bin Khalifa University
Mohammed Chaffai, Professeur, University of Sfax

Résumé

The thesis consists of four chapters. The first chapter is devoted to defining institutions and governance in the literature, exploring their role in the growth and attractiveness of developing countries to foreign investors, and the results of applied work using econometrics.

Chapter Two explores how institutional quality affects growth in a large sample of developed and developing countries. We develop two composite indicators, one of governance based on principal component analysis (PCA) of WGI indicators, and the other of information and communication technologies. We also distinguish between the effects in developed countries and those in developing regions. We relied on a dynamic panel model using a fixed-effects GMM estimator in order to guard against endogeneity bias. Our findings show that the lower the country's per capita income, the more important institutions are for growth. We also show that gross fixed capital formation, information and communication technologies, domestic credit to the private sector, trade openness, and education have a positive effect on growth in all the countries of our sample.

Chapter three examines the influence of institutional quality on foreign direct investment (FDI) flows in South Asian economies. We use the same composite governance indicator as before and distinguish the short-run relationship from the long-run relationship using an ARDL (Autoregressive Distributed Lag) model. Our result shows a positive relationship between FDI and the quality of institutions, suggesting that foreign investors consider institutions as a key dimension in the countries of the region. The results also show that information and communication technologies (through the mobile phone subscription variable) and agriculture have a positive impact on FDI inflows in the region, while the market size and macroeconomic instability (as measured by inflation) do not seem to be determinants of investors' decisions.

The fourth Chapter extends the previous work by providing an empirical analysis of the link between FDI and institutions in the specific case of Pakistan. We construct a new governance indicator that includes the involvement of the military in politics, the judiciary, and religious tensions from the ICRG database and estimates an ARDL (Autoregressive Distributive Lag) model in order to distinguish between short- and long-term dynamics. Our findings revealed that Pakistan would attract more FDI if it improves the quality of its institutions.

Mots-clés 

Institutions ; Institutions; Foreign Direct Investment; Economic Growth; Developing Countries; Pakistan.

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