| This research studies the impact that variations in freedom (economic and politic) have on foreign direct investment (FDI) inflows. The literature finds that freedoms influence FDI inflow, but they do not explore the dynamic relationship between FDI and freedom, meaning that the effects of freedom may be different at different stages of economic development. Unlike the literature, this research does not assume that the relationships between freedoms and FDI inflow are linear. Instead, I propose using income as a classification criterion to divide the samples into different groups. By doing so, I provide new testable hypotheses regarding the effects of freedom at different stages. Using data for 138 countries from 1995 to 2008, I test the hypotheses using multiple regression and other tests. I also test the relationship within a country. I apply the same methods to provincial data for China from 1996 to 2008. Both results indicate that the effects are dissimilar. This finding provides new suggestions to both future research and policy analysis. |
