First Faculty Advisor
foreign direct investment; democracy; determinants
In this paper, the relationship between Foreign Direct Investment (FDI) inflows and democracy levels of upper-middle income nations using three different measures of democracy is investigated. An empirical analysis across the years 2010 through 2018 was conducted, using the democracy indicators and data from the United States Agency for International AID (USAID). These democracy indicators are the EIU Democracy Index, Polity5, and IDEA Global State of Democracy Indices. The importance of this research revolves around the benefits of FDI inflows and how countries may capitalize on these benefits. Additionally, FDI has increased rapidly in the past 20 years and democracy has wavered, possibly establishing a new relationship. The results found no statistically significant relationship between democracy and FDI inflows. Instead, GNI per capita was discovered to have a robust and significant correlation with FDI inflows. The policy implications are that countries seeking FDI should investigate ways to increase national income first, as it is seen as an attractive quality for a firm looking to invest abroad.