The Impact of Offcial Development Assistance on Foreign Direct Investment: Evidence from Vietnam
The relationship between Foreign Direct Investment (FDI) and Official Development Assistance (ODA) has not been fully established, nor has its directionality, as evidenced the disagreement among economists. Using existing literature as starting point, I extend its base by examining key causal variables for ODA and FDI within 64 Vietnamese provinces, covering the span from 1998 to 2012. With the most extensive and newest dataset available, I find that ODA attracts more FDI inflows in intermediate term (5year average) and long term (all year average), but not in the short-term. An important policy implication of these results for developing countries, and Vietnam in particular, is that government quality needs to be sustained at a certain level, maintaining efficiency and transparency, so sufficient ODA flows can result and continue into the future.
Aid and foreign investment, Econometrics, Economic Theory, International Economics
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