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December 2012
1. Introduction
Majority of studies show that Foreign Direct Investment (FDI) can play
a fundamental role by reinforcing the capacity of the recipient country and
using opportunities given by a global economic integration. It is well-known
that a good preparation in infrastructures, in human resources and in
technology is necessary to attract FDI a given country. However, most of
developing countries appear to have limited social and economic conditions,
limited technology, and low quality of the human resources in comparison with
the developed countries. To improve this situation, strong government
expenditure is needed. In case that the governments budget is not sufficient,
outside financial resource allocation could be a good compensation. Obviously,
this financing method brings an optimum resolution for the developing
1
We would like to acknowledge the SECO-WTI Academic Cooperation Project for funding the
visiting fellowship and twinning agreement under which this research has been undertaken. We would
also like to thank Anirudh Shingal for his supervision and Pierre Sauv for his comments and
suggestions.
2
Vietnam Foreign Trade University (thuyanh.tu@gmail.com)
3
Vietnam Foreign Trade University (phuongmainice@gmail.com)
communications), the manufacturing sector (31%) and the primary sector (9%)
(UNCTAD, 2007, p.11).
ODA therefore tends to encourage more FDI as investment in education,
health, population and social infrastructure that play an essential role in the
formation of human capital and human development. In contrast, FDI is
targeting production in mining operations, manufacturing and, increasingly,
producer services and infrastructure services that contribute significantly to
other sectors including telecommunications, trade, financial and business
services.
So, we found that the coexistence of FDI and ODA in the utilities
(electricity, gas and water), transport and storage. However, ODA provides
base supports the attractiveness of FDI. Indeed, the efficient allocation of ODA
to the development of human resources, infrastructure development and
capacity building of enterprises in recipient countries. On the other hand, a
good environment of the host country based on the quality of human resources,
infrastructure and capabilities of indigenous firms is the sine-qua-non for
attracting FDI.
We know that with the help of ODA, social and economic
infrastructures are improved. For the direct channel, a good quality of
infrastructure directly contributes to improving the investment environment.
For the indirect channel, the ODA contributes to reform the quality of human
resources. In turn, a high quality workforce encourages promotion of income,
and an increase in consumption and market size. In sum, all direct and indirect
impacts of ODA positively affect the investment environment to better attract
FDI and vice versa. This idea leads to an optimal solution to use ODA as an
instrument to promote FDI in developing countries. In reality, this idea is
already developed not only by the recipient countries but also by development
assistance agencies. Recognizing that the private sector is the primary source of
employment and advance the incomes of the poor, and thus generate income
necessary to allow governments to expand access to health care, education and
infrastructure and contribute to improving productivity and creating growth
3
including poor and good for them, aid agencies thus guide the development of
increasing ODA to the efforts in encouraging countries development to address
market failures and overcome structural barriers hampering private investment.
The challenge is to ensure that ODA and FDI are complementary. To this end,
first, it should increase aid significantly in meeting the needs of attractiveness
of FDI, on the other hand, it would maximize the benefits of FDI to "ensure
that investments made in these countries translate into lasting gains for
development "(UNCTAD, 2007, p.12).
In conclusion, recall the idea of Ragnar Nurske who believes that "a
country is poor because he is poor" (1953). This is a really a vicious circle for
most LDCs. According to Elsa Assidon (2000, p.13), to break this circle, "the
support of external assistance was needed (...)". To argue, she said that "Europe
itself had she not resorted to the Marshall Plan to reboot its growth after the
war?
There are a few studies that examine the relation between foreign aid
and FDI by using cross-country panel data, most notably Harms and Lutz
(2006) and Karakaplan, Neyapti, and Sayek (2005). Karakaplan et al. (2005)
find that aid has a negative direct effect on FDI and that both good governance
and financial market development significantly improve the impact of aid on
subsequent flows of FDI. Harms and Lutz (2006), on the other hand, find that
once they control for the regulatory burden in the host country, aid works as a
complement to FDI and, surprisingly, that the catalyzing effect of foreign aid is
stronger in countries that are characterized by an unfavorable institutional
environment.
There are also some important papers analyzing specifically the relation
between Japanese FDI and aid flows. Among these, Blaise (2005) finds
positive effects from aid to infrastructure projects, while Kimura and Todo
(2010) find no positive infrastructure effect, no negative rent-seeking effect but
a positive vanguard effect (arising when foreign aid from a particular donor
country promotes FDI from the same country but not from other countries).
2. Theoretical model
As suggested by Selaya and Sunesens model (2012), assume a Solow
model for a small open economy. Assume a Cobb-Douglas production function
where GDP per capita, y, is given by
y = Ak
(1)
where k is the stock of physical capital per capita (K/L), A denotes total factor
productivity and is a constant.
Assume that the total flow of foreign aid, AID, can be split into aid
invested in complementary factors, AIDA , and aid invested in physical capital,
AIDK , so that =
AID AIDA + AIDK . The part invested in complementary
factors, AIDA , raises the marginal productivity of all production factors that are
complementary to physical capital. Aid to complementary factors helps for
example to finance infrastructure investments that lead to the interconnection
of markets, or investments in human capital improve technology adoption. On
the other hand, aid invested in physical capital, AIDK , enters the production
function only through its effect on physical capital accumulation and has no
(augmenting) effect on total factor productivity.
To model the augmenting effect of complementary aid on all production
factors that are complementary to physical capital, we allow the flow of AIDA
and FDI A to increase the existing stock of A ( AID0 ) in the economy:
A=
A0 + AIDA + FDI A
(2)
physical capital ( aid K ). Then, capital accumulation in per capita terms is given
by
.
k = sy + fdiK + aid K (n + )k
(3)
(4)
According to (4), the steady state level of k at any point in time is given
by
1
A 1
k* =
r
(5)
(6)
where y* = Ak * .
Hence, the empirical relationship between aid and FDI are not
monotonic:
dfdiK =
fdiK
fdiK
fdiK
daid K +
daid A +
dfdiA .
aid K
aid A
fdiA
The above equation holds several implications. First and the most
obviously, aid K
and
fdiK
are substitutes (
fdiK
= 1 ). Second, since
aid K
aid A and fdiA are perfectly substitutes, its impacts on fdiK are in the same
direction. Since s
y*
y*
k *
k *
(or s
) and (n + )
(or (n + )
)
aid A
fdiA
aid A
fdiA
work in opposite directions, the sign of the second and third effects will be
ambiguous. The total impacts of three effects on
indeterminate and there is room for empirical works to withdraw the final
conclusion:
7
dfdiK =
fdiK
fdiK
fdiK
>
daid K +
daid A +
dfdiA 0
aid K
aid A
fdiA
<
(7)
(8)
A 1
.
k* =
r +
(9)
aid A
Since 1992, while FDI flows have continued to progress, ODA has
declined. In real terms, total aid to LDCs in 2002, 17 billion, was 16% lower
than the figures achieved in the early 90s. The figures for development
assistance in 2007 are far from the targets (the quantitative goal for 2015 set
under the Millennium Development is 0.7%). The official development aid
distributed by all DAC members totaled USD 103.7 billion, marking a decline
of 8.4% in real terms over 2006, according to provisional data reported by
members. At a cost equivalent to 0.31% of gross national income (GNI)
accumulated in these countries in 2006, the share of ODA in GNI in 2007 was
only 0.28%. In other words, for developing countries, it is extremely difficult to
predict the flow of aid they receive. Furthermore, studies have shown that aid
tends to increase during periods of expansion and become scarce during
periods of slowdown or recession. This means that the volume of aid has
tended to contract for specific times when developing countries most in need.
In this regard, the need to increase aid effectiveness and improve the coherence
and harmonization, with a view to increasing the overall volume of aid is
considered more than ever a key objective of recipient countries and aid
agencies. In comparison, FDI inflowing into developing countries has tripled
compared to 2002. These figures allow us to conclude that flows of ODA and
FDI have evolved in different ways over the last fifteen years.
One sees clearly that nearly all ASEAN countries received higher
inflows. Singapore, Thailand, Malaysia, Indonesia and Viet Nam, in that order,
were the largest FDI recipients, together accounting for more than 90% of
flows to the sub region. While FDI growth in 2007 differed considerably
between countries, the newer ASEAN member countries in particular
(Myanmar, Viet Nam, Cambodia and the Lao Peoples Democratic Republic,
in that order) recorded the strongest FDI growth, exceeding 70% in each
(World Investment Report, 2008). Favorable regional economic growth, an
improved investment environment, higher intraregional investments, and
strengthened regional integration were key contributory factors. Reinvested
earnings were particularly strong, highlighting the importance of existing
investors as a source of FDI. Increased inflows in Viet Nam were the result of
that countrys accession to the World Trade Organization (WTO) in 2007, as
well as greater liberalization and FDI promotion efforts, particularly with
respect to infrastructure FDI. There were higher FDI inflows in extractive
10
11
28,81 % of the total and, this figure of Africa is 8,96 %. So, Asia records the
only case where the inflows of FDI are so much important as ODA. This
source of outside allocation contributes irrefutably to the improvement of social
and economic infrastructures of the ASEAN countries. So, graphically, the
figure 3 and figure 4 allow us to assume the existence of a positive interaction
between ODA and FDI in ASEAN member countries.
13
Cambodia
1 (33.84%)
2 (14.91%)
3 (13.84%)
8 (0.62%)
6 (1.76%)
5 (5.48%)
4 (7.47%)
9 (0.55%)
7 (1.46%)
76.221731
Indonesia
2 (15.34%)
1 (24.82%)
3(13.72%)
4(11.15%)
8(5.51%)
5(10.29%)
7(6.50%)
9 (0.78%)
6(7.21%)
1.375368
Lao
1(28.87%)
3(9.45%)
2(20.17%)
4(7.42%)
7(4.49%)
5(5.07%)
6(5.00%)
8(3.68%)
9(3.56%)
33.65298
Malaysia
5(10.63%)
1(26.11%)
2(14.50%)
4(12.55%)
6(764%)
8(3.23%)
7(6.63%)
9(2.51%)
3(13.15%)
910296.6
Myanmar
1(36.36%)
3(19.52%)
2(19.84%)
8(0.91%)
6(2.14%)
5(4.54%)
4(13.77%)
7(1.03%)
9(0.08%)
7779574
Philippines
3(12.31%)
1(21.44%)
2(17.37%)
9(1.43%)
7(4.14%)
6(6.12%)
5(6.51%)
8(3.57%)
4(6.91%)
129.7999
Thailand
3(12.42%)
1(35.63%)
2(13.10%)
7(3.42%)
6(4.36%)
9(2.67%)
4(6.81%)
8(2.94%)
5(6.32%)
973.3324
Vietnam
1(20.58%)
2(19.68%)
3(14.59%)
4(10.86%)
5(7.55%)
6(7.03%)
7(4.31%)
8(3.53%)
9(1.89%)
819.0824
Source: http://stats.unctad.org
Cambodia
1(50.36%)
2(33.44%)
5(1.82%)
3(8.67%)
4(4.90%)
6(0.44%)
7(0.37%)
929.8821
Indonesia
1(62.24%)
4(3.52%)
2(20.89%)
3(12.26%)
5(0.48%)
6(0.35%)
7(0.26%)
2144.219
Lao
Malaysia
1(41.66%) 1(54.87%)
3(21.91%) 7(0.72%)
2(22.50%) 2(24.15%)
4(9.69%) 3(16.18%)
6(1.37%)
4(1.75%)
5(2.34%)
5(1.31%)
7(0.53%)
6(1.02%)
449.858
71.18099
Myanmar
1(86.26%)
3(1.29%)
6(0.08%)
2(11.32%)
5(0.42%)
7(0.02%)
4(0.60%)
246.3293
Philippines
1(71.79%)
3(7.34%)
4(3.97%)
2(13.19%)
6(1.14%)
5(2.06%)
7(0.51%)
518.0623
Thailand
2(23.01%)
1(57.69%)
5(2.93%)
4(6.32%)
7(0.21%)
3(8.70%)
6(1.13%)
479.7059
Vietnam
1(45.02%)
2(25.77%)
3(12.59%)
4(11.85%)
5(2.84%)
6(1.49%)
7(0.44%)
3121.3
Source: http://stats.oecd.org
14
(10)
(11)
where fdikit is the net flow of FDI invested in physical capital to country i at
period t; fdiait is FDI invested in complementary factors; aidait denotes AID
invested in complementary factors; aidkit is AID invested in physical capital;
gdpit is gross domestic product; bop is current account balance, s is gross
domestic savings, hdi is human development index value, pop is population
and infla is inflation index. Noting that AID is divided into aida and aidk to
model the impacts of aid on fdik by the direct channel (aidk) as well as by the
indirect channel (aida).
We expect 1 to be positive in this specification since higher
investments in complementary factors raise the demand for investments in
physical capital. The net effect of aida on fdik is theoretically ambiguous,
hence will be shown only empirically. From the theoretical analysis, aidk is
expected to crowd out foreign investments, therefore the sign of 3 is expected
to be negative. We expect 4 to be positive since a host countrys size, typically
measured by GDP, is important in determining a countrys FDI inflows (Tsai,
4
Aid (also known as international aid, overseas aid, or foreign aid) is a voluntary transfer of resources
from one country to another, given at least partly with the objective of benefiting the recipient country.
The most widely measure of aid is Official Development Assistance (ODA). This term is first defined
by the DAC of the OECD in 1961.
15
1994). It is also widely argued that FDI and openness of the economy will be
positively related (Caves, 1996; Singh and Jun, 1995). Recall that the degree of
openness of the country can be measured by its export and import both divided
by GDP. So, we include the BOP in the regression and expect that its
coefficient 5 is positive. 6 should be negative since a high level of domestic
savings lowers the need for foreign capital. We also expect 7 to be positive
since a higher quality of labors can encourage more investors in FDI. Finally,
8 is expected to be positive since a big size of the local market, represented by
the population, allows for an increase in FDI.
Besides, we assume that not all countries start out with the same initial
conditions, and therefore we include time and country effects in the model. To
avoid missing relevant variables, we extend the list of regressors to include a
lagged dependent variable, which basically reflects the persistent nature of fdik.
We believe that the omitted variables bias is substantially reduced by including
a full set of time dummies, individual country effects, the initial level of GDP,
and the lagged level of the dependent variable.
Our final empirical model is specified as follows :
fdikit = 0+ 1fdiait+ 2aidait+ 3aidkit+ 4gdpit+ 5bopit+ 6sit+ 7hdiit+
8popit+ 9inflait+ 10 country+ 11 year+ 12lagfdik+ uit
(12)
5. Data
The dependent variable in all our regressions, fdikit, is the sum of FDI
invested in 6 sectors: agriculture, mining, manufacturing, construction, trade
and finance which represent physical capital sector. The independent variable,
fdiait, is the sum of FDI flows in complementary inputs (such as electricity,
transport and communications, public administration, taxes minus subsidies on
products, taxes on imports and less imputed bank service charges). Because we
cannot obtain any FDI database classified by sector, we indirectly construct this
data by ourselves. We collect data on FDI as percentage of GDP from
UNCTAD website, and collect data on GDP by sector from ADB database. We
then derive FDI by sector data basing on the following equation:
16
(13)
where FDIit is FDI in sector i during period t; GDPit is GDP in sector i during
period t; % (FDI/GDP) is percentage of FDI in total GDP of country j at time
t ; r is exchange rate between local currency and USD at time t.
The aid variables are total net flows of official aid commitments
reported in the OECD aid statistic database. Aid is also decomposed into two
broad categories, relying on the sectoral disaggregation from OECDs Aid
Activity database:
Aid invested in complementary inputs, aida, is all aid used in social
infrastructure (such as communications, energy, social infrastructure and
transport).
Aid invested in physical capital, aidk, is all aid contributing directly to
production sectors (such as banking, business and production).
These two categories capture the main characteristics of aida and aidk:
aid invested in complementary factors intended to generate positive spillover
effects (public goods, inputs complementary to physical capital) whereas aid
invested in physical capital has a more narrow purpose and could more easily
have been undertaken by private investors.
17
Indonesia
Laos
Malaysia
18
Myanmar
Philippines
Thailand
Vietnam
19
Indonesia
Laos
Malaysia
20
Myanmar
Philippines
Thailand
Vietnam
21
is current price at
Aida
Definition
FDI invested in physical capital
(agriculture+ mining+ manufacturing+
construction+ trade+ finance)
FDI invested in complementary factors
(electricity, gas & water+ transport&
communications+ public administration+
others+ taxes less subsidies on products+ taxes
on imports- imputed bank service charges)
AID invested in complementary factors
(communications+ energy+ social
infrastructure+ transport)
Aidk
GDP
Bop
Fdik
Fdia
22
Unit
billions USD,
constant price
2000
Source
ADB,
UNCTA
D
millions USD,
constant price
2000
millions USD,
constant price
2000
billions USD,
constant price
2000
billions USD,
constant price
2000
billions USD,
constant price
ADB,
UNCTA
D
Sign
UNCTA + or
D UNCTA
D
IMF +
IMF +
Infla
Inflation
Hdi
Pop
Population
2000
average
consumer prices
Index
billions USD,
constant price
2000
IMF -
ADB -
HDR/U
NDP +
millions persons
+ or
IMF -
Notes :
-
ADB : Asian Development Bank (ADB)/ Key Indicators for Asia and
the Pacific 2011/ www.adb.org/statistics
6. Empirical results
i) OLS
We start by estimating the impact of independent variables on fdik using
OLS to have a benchmark.
Table 4: Estimation Results of Panel Method of FDI Inflows for ASEAN
Countries Using OLS
Dependent Variable= fdik
Coefficients (OLS)
Coefficient
P-value
-880.8093
0.250
5.29712
0.000*
.0578955
0.283
-.3366853
0.013*
-.0591393
0.943
-.5645343
0.859
-.6836061
0.557
Variables
Intercept
Fdia
Aida
Aidk
Gdp
Bop
S
23
Hdi
Pop
Infla
Lagfdik
817.8138
2.444029
.7025877
-.131042
0.132
0.387
0.375
0.007*
R2
0.9966
Obser.
127
Note:** *, ** and * indicate 10%, 5% and 1% level of significant respectively
So, by including a set of dummies for year and country, we are also
controlling the impact of time dimension and country dimension. Except fdia
estimator, lagfdik, aida and aidk estimators are not good as our expectation: the
coefficient of aida is positive but not significative while the coefficient of aidk
and lagfdik are all negative.
ii) FE/RE models
Because our dataset is panel data (cross-sectional time-series data), we
have to decide whether fixed effect or random effect model fits our data. For
that purpose, we run a Hausman test where the null hypothesis is random
effects (the preferred model) versus the alternative is the fixed effects.
Table 5: Estimation Results of Panel Method of FDI Inflows for ASEAN
Countries Using FE Model
Variables
Intercept
fdia
aida
aidk
gdp
bop
s
hdi
pop
infla
lagfdik
R2
0.9918
Obser.
127
Note: ** *, ** and * indicate 10%, 5% and 1% level of significant respectively
24
Variables
Intercept
Fdia
Aidk
Gdp
Bop
S
Infla
Lagfdik
R2
0.9962
Obser.
127
Note: ** *, ** and * indicate 10%, 5% and 1% level of significant respectively
Instrumenting for aidk here has led to a coefficient of 0.365 but this is
insignificantly different from zero. Now, we run the 2SLS regression to get the
following result :
Table 7: Estimation Results of Panel Method of FDI Inflows for ASEAN
Countries Using 2SLS model (1st stage)
Dependent Variable= aidk
Coefficients (2SLS)
Coefficient
P-value
Variables
Intercept
fdia
aida
gdp
bop
.0000132
.107984
0002371
.00199
25
0.246
0.004*
0.595
0.333
s
hdi
pop
infla
lagfdik
-.0001081
.197392
-.0020961
.0001611
-8.94e-06
0.199
0.435
0.251
0.059**
0.087***
R2
0.6958
Obser.
127
Note: ** *, ** and * indicate 10%, 5% and 1% level of significant respectively
Looking at the first stage we see that few of the instruments have
coefficients significantly different from zero- we might be concerned that the
instrument is weak.
iv) Arellano- Bond GMM estimator
Several econometric problems may arise from estimating equation (10):
(1) The capital flows variables in fdikit are assumed to be endogenous.
Because causality may run in both directions- from capital inflows to
investment to investment and vice versa-these regressors may be
correlated with the error term.
(2) Time-invariant country characteristics (fixed effects), such as geography
and demographics, may be correlated with the explanatory variables.
The fixed effects are contained in the error term in equation (1), which
consists of the unobserved country-specific effects and the observationspecific errors.
(3) The presence of the lagged dependent variable lagfdikit gives rise to
autocorrelation.
(4) Heteroskedasticity and autocorrelation within individuals, but not across
them. 5
(5) Independent variables that are not strictly exogenous, meaning
correlated with past and current realizations of the error. 6
To solve problem (1) and (2), one would usually use fixed-effects
instrumental variables estimation (2SLS) which is what we tried first.
5
6
26
However, the first-stage statistics of the 2SLS regressions showed that our
instruments were weak. With weak instruments the fixed-effects IV estimators
are likely to be biased in the way of the OLS estimators. Therefore, we decide
to use the Arellano-Bond (1991) difference GMM estimator first proposed by
Holtz-Eakin, Newey and Rosen (1988). The first-differenced lagged dependent
variable (problem 3) is also instrumented with its past levels. Finally, the
problem of heteroskedasticity (4) and cross-sectional dependence (5) will also
be removed.
Before using Arellano-Bond GMM, we need to test for the stationarity
of the model by unit root tests. As Maddala and Wu (1999) describe the IPS
test the IPS test is a way of combining the evidence on the unit-root
hypothesis from the N unit-root tests performed on the N cross-section units.
Fisher-type panel unit-root tests make this approach explicit. 7 That is the
reason why we use the Fisher-type tests in our model.
We consequently test for a unit root in fdik, fdia, aida, aidk, bop, gdp, s,
hdi, bop and infla. We will use the ADF test. Because the number of panels is
finite, the inverse 2 test is applied. 8
As before, we apply the panel unit root tests including constant and
trend in level. The results are shown in table 8 as follows:
Table 8: Panel unit root test results in level
Variable
fdik
fdia
aida
aidk
xtunitroot fisher combine the p-values from the panel-specific unit-root tests using the four methods
proposed by Choi (2001). Three of the methods differ in wheher they use the inverse 2, inverse
normal, or inverse logit transformation of p-values, and the fourth is a modification of the inverse 2
transformation that is suitable for when N tends to infinity. The inverse normal and inverse logit
transformation can be used whether N is finite or infinite.
The null hypothesis being tested by xtunitroot fisher is that all panels contain a unit root. For a finite
number of panels, the alternative is that at least one panel is stationary. As N tends to infinity, the
number of panels that do not have a unit root should grow at the same rate as N under the alternative
hypothesis.
8
this statistic has a 2 distribution with N degrees of freedom, and large values are cause to reject the
null hypothesis. Under the null hypothesis, as T followed by N , P tends to infinity so that P
has a degenerate limiting distribution.
27
Bop
25.8593** (0.0560)
18.8090 (0.2787)
Gdp
2.0586 (1.0000)
8.5978 (0.9290)
S
2.8760 (0.9999)
14.3298 (0.5742)
Hdi
16.9438 (0.3892)
3.6266 (0.9994)
Pop
16.2523 (0.4355)
18.1931 (0.3127)
Infla
1.0899 (1.0000)
6.1648 (0.9862)
The p-value is in parentheses, ** and * denote the rejection of the null
hypothesis at 5% and 1% significance, respectively.
We find that the panel unit root tests results strongly support stationary
of fdik, fdia, aida, aidk and bop. The remaining variables (gdp, s, hdi, pop and
infla) are not stationary (integrated of order 0) due to the possible endoneneity
of regressors. Hence, we suggest that these variables are integrated of order 1
or higher. In fact, a variable is determined to be I(1) if a unit root is found in
levels and stationarity is found in first differences. From table 9, we have
evidence to reject the null hypothesis that all panels contain unit roots.
Table 9: Panel unit root test results in first difference
ADF-Fisher chi square
ADF-Fisher chi square
Variable
(constant)
(trend)
Gdp
332.0537* (0.0000)
320.7439* (0.0000)
S
402.0790* (0.0000)
402.2064* (0.0000)
Hdi
265.9168* (0.0000)
268.0739* (0.0000)
Pop
505.1528* (0.0000)
505.1804* (0.0000)
Infla
387.7467* (0.0000)
371.7836* (0.0000)
The p-value is in parentheses, ** and * denote the rejection of the null
hypothesis at 5% and 1% significance, respectively.
So, the regressors fdik, fdia, aida, aidk and bop will be kept in level
without trend while gdp, s, hdi, pop and infla will be transformed by first
differencing. In that way, we have a stationary model.
GMM estimator by controlling time and country effects
From equation (1) we get:
fdikit = 1fdiait+ 2aidait+ 3aidkit+ 4Dgdpit+ 5bopit+ 6Dsit+ 7Dhdiit+
8Dpopit+ 9Dinflait+10lagfdikit+ 11country+ 12year+ vit
(15)
where:
Dgdpit denotes the gross domestic product variable in first difference,
Dsit denotes the gross demostic savings variable in first difference,
28
Variables
Intercept
Lagfdik
Dgdp
Bop
Dpop
Dhdi
Ds
Fdia
Dinfla
Aida
Aidk
Number of Obs.
112
Number of instruments
113
Wald chi2(24)
42443.86 (0.0000)
Note:** *, ** and * indicate 10%, 5% and 1% level of significant respectively
We see that all important instruments have coefficients significantly
different from zero: the coefficient on lagfdik is -0.092 at 1% significance, the
coefficient on fdia is 4.95 at 1% significance, the coefficient on aida is 0.915 at
10% significance and the coefficient on aidk is -0.251 at 10% significance.
GMM estimator without controlling time and year effects
From equation (10) we get:
fdikit = 1fdiait+ 2aidait+ 3aidkit+ 4Dgdpit+ 5bopit+ 6Dsit+ 7Dhdiit+
8Dpopit+ 9Dinflait+10lagfdikit+ vit
(16)
29
Table 11: Estimation Results of Panel Method of FDI Inflows for ASEAN
Countries Using GMM model without year and country effects
Dependent Variable= fdik
Coefficients (2SLS)
Coefficient
P-value
Variables
Intercept
Lagfdik
Dgdp
Bop
Dpop
Dhdi
Ds
Fdia
Dinfla
Aida
Aidk
-.0978983
.1905667
-.9810358
-123.2232
432.4764
-1.174967
4.946891
4.715908
.0695371
-.2305563
0.000*
0.711
0.384
0.211
0.396
0.000*
0.000*
0.000*
0.087***
0.025**
R2
Number of Obs.
112
Number of instruments
95
Wald chi2(7)
1701.45 (0.0000)
Note:** *, ** and * indicate 10%, 5% and 1% level of significant respectively
We can consider that the P-value of aida and aidk in this case is better
than theirs in previous regression except the case of Dpop variable. The results
confirm one dollar of fdi invested on physical capital attracts on average 4.95
dollars of additional fdik. On the other hand, the result shows that one dollar of
aid invested on physical capital crowds out on average 0.23 dollars of fdik. The
table also shows that one aid dollar invested in complementary factors attracts
on average 0.70 dollars of additional fdik. The effect of other controls is either
insignificant or goes according to the theoretical predictions: population enters
insignificantly, domestic savings negatively (1 additional dollar of domestic
savings is associated with 1,17 dollars less of fdik, and initial GDP enters
positively (1 additional dollar of GDP at the beginning of each period tends to
attract 0.19 dollar of fdik on average.
Postestimation
30
7. Concluding remarks
The analysis shows strict relations between FDI and ODA into a country.
We find robust evidence for ASEAN countries that FDI and ODA invested in
physical capital are substitutes as expected, even though they are not perfectly
substitutes. One possible reason is that the ODA we use in the empirical
analysis is the commitment ODA instead of the disbursement ODA due to the
availability of data. It is also shown that both FDI and AID in complementary
factors are complementary to FDI in physical captital. Results can provide
inputs for decision making of foreign investors and donors in general and in
South East region in particular.
31
REFERENCES
Assidon E. (2000), Les thories conomiques du dveloppement , La
Dcouverte, 3me dition, Paris.
Assidon E. (2000), Les thories conomiques du dveloppement , La
Dcouverte.
Ben Abdallah M., Drine I., Meddeb R. (2001), Interaction entre IDE, regime
de change, capital humain et croissance dans les pays mergents,
document de travail, Ouverture conomique et dveloppement,
GDR, Economica.
Blaise, S. (2005). On the link between Japanese ODA and FDI in
China:
32
33
LEE, H-L. & HOUDE, M-F. (2000).Recent trends and main characteristics of
foreign direct investment in China. Financial market trends, No. 77,
October, OECD.Hansen and Tarp (2000).
Magalhes, M. and Africano, A., (2007), A panel analysis of the FDI impact
on Internatinal trade, FEP (Faculdade de economia universidade do
Porto) working papers.
Mallampally P., Sauvant Karl P. (1999), Linvestissement direct tranger dans
les pays en dveloppement, Finances & Dveloppement, volume
36, numro 1, pp. 34-37.
Nurske R. (1953), Problems of capital formation in underdeveloped countries
, Basil Blackwell, Oxford, first edition, pp.4- 11.
OECD (2002), Tendances et volution rcente de linvestissement direct
tranger , Perspectives de linvestissement international, Edition
2002, OCDE.
OECD (2003a), Liste de critres pour apprcier les stratgies dincitations
linvestissement direct tranger , Perspectives de linvestissement
international, ISBN 92-64-10361-9, pp.112-152.
OECD (2003b), Tendances de linvestissement direct tranger dans les pays
de lOCDE , Perspectives conomiques de lOCDE, pp.193-201.
OECD (2003c), Lentreprenariat et le dveloppement conomique local :
quels programmes et quelles politiques?, les ditions de lOCDE.
OECD (2003d), Harmoniser laide pour renforcer son efficacit , les
ditions de lOCDE.
OECD (2006), Promouvoir linvestissement priv au service du
dveloppement- le rle de lAPD , un document de rfrence du
CAD.
Olivier G. (2004), Laide publique au dveloppement , Charles Lopold
Mayer.
PHAM Thu Hien (2008), Effect of ODA in infrastructure in attracting FDI
inflows in Vietnam, work papers, Ministry of Planning and
investment of Vietnam.
34
production
and
development,
United
Nations
35
APPENDIX
1. Heteroskedasticity test
. xtreg fdik fdia aida aidk gdp bop s hdi pop infla lagfdik, fe
Fixed-effects (within) regression
Group variable: country
Number of obs
Number of groups
=
=
127
8
R-sq:
15
15.9
16
within = 0.9941
between = 0.9908
overall = 0.9918
corr(u_i, Xb)
= 0.3384
F(10,109)
Prob > F
=
=
1832.40
0.0000
-----------------------------------------------------------------------------fdik |
Coef.
Std. Err.
t
P>|t|
[95% Conf. Interval]
-------------+---------------------------------------------------------------fdia |
5.265827
.0748263
70.37
0.000
5.117524
5.41413
aida |
.029585
.0745584
0.40
0.692
-.1181873
.1773572
aidk | -.1572828
.2204934
-0.71
0.477
-.5942935
.2797279
gdp | -.1953439
.7275726
-0.27
0.789
-1.637369
1.246681
bop | -4.840637
3.285552
-1.47
0.144
-11.35249
1.67122
s | -.4659532
.4294811
-1.08
0.280
-1.317171
.3852645
hdi |
448.464
390.9469
1.15
0.254
-326.3801
1223.308
pop | -.6414817
3.898563
-0.16
0.870
-8.368307
7.085343
infla |
.3537186
.3023647
1.17
0.245
-.2455585
.9529956
lagfdik | -.1081347
.0205067
-5.27
0.000
-.1487783
-.0674911
_cons | -293.4201
329.8004
-0.89
0.376
-947.0737
360.2335
-------------+---------------------------------------------------------------sigma_u | 199.56759
sigma_e | 180.59799
rho | .54977435
(fraction of variance due to u_i)
-----------------------------------------------------------------------------F test that all u_i=0:
F(7, 109) =
5.69
Prob > F = 0.0000
. xttest3
Modified Wald test for groupwise heteroskedasticity
in fixed effect regression model
H0: sigma(i)^2 = sigma^2 for all i
chi2 (8) =
Prob>chi2 =
8857.45
0.0000
The null is homoscedasticity (or constant variance). Above we reject the null and
conclude heteroskedasticity.
Number of obs
Number of groups
=
=
127
8
R-sq:
15
15.9
16
within = 0.9941
between = 0.9908
overall = 0.9918
F(10,109)
1832.40
36
corr(u_i, Xb)
= 0.3384
Prob > F
0.0000
-----------------------------------------------------------------------------fdik |
Coef.
Std. Err.
t
P>|t|
[95% Conf. Interval]
-------------+---------------------------------------------------------------fdia |
5.265827
.0748263
70.37
0.000
5.117524
5.41413
aida |
.029585
.0745584
0.40
0.692
-.1181873
.1773572
aidk | -.1572828
.2204934
-0.71
0.477
-.5942935
.2797279
gdp | -.1953439
.7275726
-0.27
0.789
-1.637369
1.246681
bop | -4.840637
3.285552
-1.47
0.144
-11.35249
1.67122
s | -.4659532
.4294811
-1.08
0.280
-1.317171
.3852645
hdi |
448.464
390.9469
1.15
0.254
-326.3801
1223.308
pop | -.6414817
3.898563
-0.16
0.870
-8.368307
7.085343
infla |
.3537186
.3023647
1.17
0.245
-.2455585
.9529956
lagfdik | -.1081347
.0205067
-5.27
0.000
-.1487783
-.0674911
_cons | -293.4201
329.8004
-0.89
0.376
-947.0737
360.2335
-------------+---------------------------------------------------------------sigma_u | 199.56759
sigma_e | 180.59799
rho | .54977435
(fraction of variance due to u_i)
-----------------------------------------------------------------------------F test that all u_i=0:
F(7, 109) =
5.69
Prob > F = 0.0000
According to the results, one we account for state FE, aida and aidk has no effect
upon fdik. An assumption implicit in estimating (1) is that the cross-sectional units are
independent. The xtcsd command allows us to test the following hypothesis:
H0: cross-sectional independence
To test this hypothesis, we use the xtcsd command after fitting the above panel-data
model. We initially use Pesarans (2004) CD test:
. xtcsd, pesaran abs
Pesaran's test of cross sectional independence =
3.136, Pr = 0.0017
0.306
As we can see, the CD test strongly rejects the null hypothesis of no cross-sectional
dependence. Although it is not the case here, a possible drawback of the CD test is
that adding up positive and negative correlation may result in failing to reject the null
hypothesis even if there is plenty of cross-sectional dependence in the errors.
Including the abs option in the xtcsd command, we can get the average absolute
correlation of the residuals. Here the average absolute correlation is 0.306, which is a
very high value. Hence, there is enough evidence suggesting the presence of crosssectional dependence in (1) under an FE specification.
Next we corroborate these results by using the remaining two tests Frees (1995) and
Friedman (1937):
. xtcsd, frees
Frees' test of cross sectional independence =
0.398
|--------------------------------------------------------|
Critical values from Frees' Q distribution
alpha = 0.10 :
0.1719
alpha = 0.05 :
0.2262
alpha = 0.01 :
0.3351
. xtcsd, friedman
Friedman's test of cross sectional independence =
17.325, Pr = 0.0154
37
As we would have expected from the highly significant results of the CD test, both
Frees and Friedmans tests reject the null of cross-sectional independence. Since T
30, Frees test provides the critical values for = 0.10, = 0.05 and = 0.01 from the
Q distribution, Frees statistic is larger than the critical value with at least = 0.01.
Using the RE estimator, we have the results shown below:
. xtreg fdik fdia aida aidk gdp bop s hdi pop infla lagfdik, re
Random-effects GLS regression
Group variable: country
Number of obs
Number of groups
=
=
127
8
R-sq:
15
15.9
16
within = 0.9932
between = 0.9980
overall = 0.9947
Wald chi2(10)
Prob > chi2
=
=
21572.91
0.0000
-----------------------------------------------------------------------------fdik |
Coef.
Std. Err.
z
P>|z|
[95% Conf. Interval]
-------------+---------------------------------------------------------------fdia |
5.237567
.0837154
62.56
0.000
5.073488
5.401646
aida | -.0756591
.0616294
-1.23
0.220
-.1964505
.0451323
aidk |
-.43269
.2333102
-1.85
0.064
-.8899697
.0245896
gdp | -1.713865
.4977064
-3.44
0.001
-2.689352
-.7383787
bop | -.0229533
3.244583
-0.01
0.994
-6.38222
6.336313
s | -.4778182
.4431746
-1.08
0.281
-1.346425
.390788
hdi |
121.3234
239.2368
0.51
0.612
-347.5721
590.219
pop |
1.634705
.4466665
3.66
0.000
.7592549
2.510155
infla |
.6893927
.2382594
2.89
0.004
.222413
1.156372
lagfdik | -.1208659
.019442
-6.22
0.000
-.1589715
-.0827604
_cons | -97.96013
149.77
-0.65
0.513
-391.5039
195.5836
-------------+---------------------------------------------------------------sigma_u |
0
sigma_e | 180.59799
rho |
0
(fraction of variance due to u_i)
------------------------------------------------------------------------------
The results of this second model are in line with those of the previous one, with aida
and aidk having no significant effects upon fdik (at = 0.05). We now test for crosssectional independence by using the new RE specification:
. xtcsd, pesaran abs
Pesaran's test of cross sectional independence =
3.584, Pr = 0.0003
0.269
. xtcsd, frees
Frees' test of cross sectional independence =
0.295
|--------------------------------------------------------|
Critical values from Frees' Q distribution
alpha = 0.10 :
0.1719
alpha = 0.05 :
0.2262
alpha = 0.01 :
0.3351
. xtcsd, friedman
Friedman's test of cross sectional independence =
17.800, Pr = 0.0129
38
3. OLS
. xi: regress fdik fdia aida aidk gdp bop s hdi pop infla lagfdik i.country
i.year, vce (robust)
i.country
_Icountry_1-8
(naturally coded; _Icountry_1 omitted)
i.year
_Iyear_1995-2010
(naturally coded; _Iyear_1995 omitted)
Linear regression
Number of obs =
F( 32,
94) =
Prob > F
=
R-squared
=
Root MSE
=
127
205.49
0.0000
0.9966
181.23
-----------------------------------------------------------------------------|
Robust
fdik |
Coef.
Std. Err.
t
P>|t|
[95% Conf. Interval]
-------------+---------------------------------------------------------------fdia |
5.29712
.1582804
33.47
0.000
4.98285
5.611389
aida |
.0578955
.0536636
1.08
0.283
-.0486548
.1644457
aidk | -.3366853
.1323415
-2.54
0.013
-.5994524
-.0739183
gdp | -.0591393
.8207194
-0.07
0.943
-1.688697
1.570418
bop | -.5645343
3.1581
-0.18
0.859
-6.835016
5.705947
s | -.6836061
1.158699
-0.59
0.557
-2.98423
1.617018
hdi |
817.8138
538.4393
1.52
0.132
-251.2701
1886.898
pop |
2.444029
2.813773
0.87
0.387
-3.142782
8.030841
infla |
.7025877
.7881125
0.89
0.375
-.862228
2.267403
lagfdik |
-.131042
.0473124
-2.77
0.007
-.2249819
-.0371022
_Icountry_2 |
532.8991
558.1757
0.95
0.342
-575.3717
1641.17
_Icountry_3 |
559.2849
583.0009
0.96
0.340
-598.277
1716.847
_Icountry_4 |
644.7411
477.1533
1.35
0.180
-302.658
1592.14
_Icountry_5 |
349.4011
498.1253
0.70
0.485
-639.6383
1338.441
_Icountry_6 |
114.7235
342.0132
0.34
0.738
-564.3519
793.7988
_Icountry_7 | -54.10324
403.1581
-0.13
0.894
-854.583
746.3765
_Icountry_8 |
155.9275
349.8754
0.45
0.657
-538.7583
850.6132
_Iyear_1996 |
-132.722
81.09713
-1.64
0.105
-293.7423
28.29824
_Iyear_1997 | -156.2683
84.12847
-1.86
0.066
-323.3073
10.77079
_Iyear_1998 | -209.5504
88.12006
-2.38
0.019
-384.5149
-34.58598
_Iyear_1999 | -205.5174
96.02574
-2.14
0.035
-396.1788
-14.85609
_Iyear_2000 | -244.8052
97.93137
-2.50
0.014
-439.2502
-50.36013
_Iyear_2001 | -98.76333
132.3419
-0.75
0.457
-361.5313
164.0046
_Iyear_2002 | -147.1242
118.1699
-1.25
0.216
-381.7534
87.50497
_Iyear_2003 | -168.9311
103.9054
-1.63
0.107
-375.2376
37.37551
_Iyear_2004 | -195.7095
109.0201
-1.80
0.076
-412.1714
20.75241
_Iyear_2005 | -268.0949
117.4786
-2.28
0.025
-501.3514
-34.83836
_Iyear_2006 | -367.2309
95.27106
-3.85
0.000
-556.3938
-178.0679
_Iyear_2007 | -235.5673
174.6601
-1.35
0.181
-582.359
111.2244
_Iyear_2008 | -199.7984
116.3353
-1.72
0.089
-430.785
31.18808
_Iyear_2009 | -301.3504
141.7787
-2.13
0.036
-582.8554
-19.84542
_Iyear_2010 | -265.2107
113.0739
-2.35
0.021
-489.7215
-40.69985
_cons | -880.8093
760.3566
-1.16
0.250
-2390.515
628.8965
------------------------------------------------------------------------------
4. FE/RE models
. xtreg fdik fdia aida aidk gdp bop s hdi pop infla lagfdik, fe
Fixed-effects (within) regression
Group variable: country
Number of obs
Number of groups
=
=
127
8
R-sq:
15
15.9
16
within = 0.9941
between = 0.9908
overall = 0.9918
corr(u_i, Xb)
= 0.3384
F(10,109)
Prob > F
=
=
1832.40
0.0000
-----------------------------------------------------------------------------fdik |
Coef.
Std. Err.
t
P>|t|
[95% Conf. Interval]
-------------+---------------------------------------------------------------fdia |
5.265827
.0748263
70.37
0.000
5.117524
5.41413
aida |
.029585
.0745584
0.40
0.692
-.1181873
.1773572
aidk | -.1572828
.2204934
-0.71
0.477
-.5942935
.2797279
gdp | -.1953439
.7275726
-0.27
0.789
-1.637369
1.246681
39
bop | -4.840637
3.285552
-1.47
0.144
-11.35249
1.67122
s | -.4659532
.4294811
-1.08
0.280
-1.317171
.3852645
hdi |
448.464
390.9469
1.15
0.254
-326.3801
1223.308
pop | -.6414817
3.898563
-0.16
0.870
-8.368307
7.085343
infla |
.3537186
.3023647
1.17
0.245
-.2455585
.9529956
lagfdik | -.1081347
.0205067
-5.27
0.000
-.1487783
-.0674911
_cons | -293.4201
329.8004
-0.89
0.376
-947.0737
360.2335
-------------+---------------------------------------------------------------sigma_u | 199.56759
sigma_e | 180.59799
rho | .54977435
(fraction of variance due to u_i)
-----------------------------------------------------------------------------F test that all u_i=0:
F(7, 109) =
5.69
Prob > F = 0.0000
. estimates store FIXED
. xtreg fdik fdia aida aidk gdp bop s hdi pop infla lagfdik, re
Random-effects GLS regression
Group variable: country
Number of obs
Number of groups
=
=
127
8
R-sq:
15
15.9
16
within = 0.9932
between = 0.9980
overall = 0.9947
Wald chi2(10)
Prob > chi2
=
=
21572.91
0.0000
-----------------------------------------------------------------------------fdik |
Coef.
Std. Err.
z
P>|z|
[95% Conf. Interval]
-------------+---------------------------------------------------------------fdia |
5.237567
.0837154
62.56
0.000
5.073488
5.401646
aida | -.0756591
.0616294
-1.23
0.220
-.1964505
.0451323
aidk |
-.43269
.2333102
-1.85
0.064
-.8899697
.0245896
gdp | -1.713865
.4977064
-3.44
0.001
-2.689352
-.7383787
bop | -.0229533
3.244583
-0.01
0.994
-6.38222
6.336313
s | -.4778182
.4431746
-1.08
0.281
-1.346425
.390788
hdi |
121.3234
239.2368
0.51
0.612
-347.5721
590.219
pop |
1.634705
.4466665
3.66
0.000
.7592549
2.510155
infla |
.6893927
.2382594
2.89
0.004
.222413
1.156372
lagfdik | -.1208659
.019442
-6.22
0.000
-.1589715
-.0827604
_cons | -97.96013
149.77
-0.65
0.513
-391.5039
195.5836
-------------+---------------------------------------------------------------sigma_u |
0
sigma_e | 180.59799
rho |
0
(fraction of variance due to u_i)
-----------------------------------------------------------------------------. estimates store RANDOM
. hausman FIXED RANDOM
Note: the rank of the differenced variance matrix (9) does not equal the number
of coefficients being tested (10); be sure
this is what you expect, or there may be problems computing the test.
Examine the output of your estimators for
anything unexpected and possibly consider scaling your variables so
that the coefficients are on a similar scale.
---- Coefficients ---|
(b)
(B)
(b-B)
sqrt(diag(V_b-V_B))
|
FIXED
RANDOM
Difference
S.E.
-------------+---------------------------------------------------------------fdia |
5.265827
5.237567
.0282603
.
aida |
.029585
-.0756591
.105244
.0419615
aidk |
-.1572828
-.43269
.2754073
.
gdp |
-.1953439
-1.713865
1.518521
.5307072
bop |
-4.840637
-.0229533
-4.817684
.5172334
s |
-.4659532
-.4778182
.011865
.
hdi |
448.464
121.3234
327.1405
309.201
pop |
-.6414817
1.634705
-2.276187
3.872891
infla |
.3537186
.6893927
-.3356741
.1861636
lagfdik |
-.1081347
-.1208659
.0127313
.0065218
-----------------------------------------------------------------------------b = consistent under Ho and Ha; obtained from xtreg
B = inconsistent under Ha, efficient under Ho; obtained from xtreg
40
Test:
Ho:
5. 2SLS
. xi: ivregress 2sls fdik fdia gdp bop s infla lagfdik i.country i.year (aidk=
aida hdi pop), vce (robust)
i.country
_Icountry_1-8
(naturally coded; _Icountry_1 omitted)
i.year
_Iyear_1995-2010
(naturally coded; _Iyear_1995 omitted)
Instrumental variables (2SLS) regression
Number of obs
Wald chi2(29)
Prob > chi2
R-squared
Root MSE
=
127
= 7848.48
= 0.0000
= 0.9962
= 164.13
-----------------------------------------------------------------------------|
Robust
fdik |
Coef.
Std. Err.
z
P>|z|
[95% Conf. Interval]
-------------+---------------------------------------------------------------aidk |
.365944
.3457708
1.06
0.290
-.3117544
1.043642
fdia |
5.275206
.137554
38.35
0.000
5.005605
5.544806
gdp |
-.03536
.697027
-0.05
0.960
-1.401508
1.330788
bop | -3.883426
3.356176
-1.16
0.247
-10.46141
2.694557
s | -.5759026
1.026894
-0.56
0.575
-2.588578
1.436773
infla |
.5449874
.7126974
0.76
0.444
-.8518738
1.941849
lagfdik | -.1214462
.041677
-2.91
0.004
-.2031316
-.0397607
_Icountry_2 | -32.94913
81.29557
-0.41
0.685
-192.2855
126.3873
_Icountry_3 | -28.36329
83.33979
-0.34
0.734
-191.7063
134.9797
_Icountry_4 |
254.9483
178.1031
1.43
0.152
-94.12738
604.0239
_Icountry_5 |
67.0228
68.38112
0.98
0.327
-67.00174
201.0473
_Icountry_6 | -165.8551
54.241
-3.06
0.002
-272.1655
-59.54472
_Icountry_7 | -327.7702
47.99942
-6.83
0.000
-421.8474
-233.6931
_Icountry_8 |
-261.036
99.06572
-2.63
0.008
-455.2013
-66.87078
_Iyear_1996 | -134.3955
75.95101
-1.77
0.077
-283.2567
14.46578
_Iyear_1997 | -91.30764
75.04342
-1.22
0.224
-238.39
55.77476
_Iyear_1998 | -140.3063
77.53194
-1.81
0.070
-292.2661
11.6535
_Iyear_1999 | -160.2621
83.29842
-1.92
0.054
-323.524
2.999849
_Iyear_2000 | -120.8747
94.73
-1.28
0.202
-306.5421
64.79264
_Iyear_2001 | -29.72452
103.7509
-0.29
0.774
-233.0725
173.6235
_Iyear_2002 | -43.97234
96.0431
-0.46
0.647
-232.2134
144.2687
_Iyear_2003 | -49.48728
89.36801
-0.55
0.580
-224.6454
125.6708
_Iyear_2004 |
-67.5958
90.08821
-0.75
0.453
-244.1654
108.9738
_Iyear_2005 | -130.2547
93.13816
-1.40
0.162
-312.8022
52.29269
_Iyear_2006 | -186.0564
83.63181
-2.22
0.026
-349.9718
-22.14109
_Iyear_2007 | -76.68261
145.077
-0.53
0.597
-361.0282
207.663
105.2958
-0.97
0.334
-308.059
104.6928
_Iyear_2008 | -101.6831
_Iyear_2009 | -209.3674
126.4222
-1.66
0.098
-457.1504
38.41566
_Iyear_2010 | -168.6602
109.7717
-1.54
0.124
-383.8087
46.48831
_cons |
56.66896
122.4495
0.46
0.644
-183.3276
296.6655
-----------------------------------------------------------------------------Instrumented: aidk
Instruments:
fdia gdp bop s infla lagfdik _Icountry_2 _Icountry_3
_Icountry_4 _Icountry_5 _Icountry_6 _Icountry_7 _Icountry_8
_Iyear_1996 _Iyear_1997 _Iyear_1998 _Iyear_1999 _Iyear_2000
_Iyear_2001 _Iyear_2002 _Iyear_2003 _Iyear_2004 _Iyear_2005
_Iyear_2006 _Iyear_2007 _Iyear_2008 _Iyear_2009 _Iyear_2010
aida hdi pop
. xi: ivregress 2sls fdik fdia gdp bop s infla lagfdik i.country i.year (aidk=
aida hdi pop), vce (robust) first
i.country
_Icountry_1-8
(naturally coded; _Icountry_1 omitted)
i.year
_Iyear_1995-2010
(naturally coded; _Iyear_1995 omitted)
First-stage regressions
----------------------Number of obs
=
F( 31,
95) =
Prob > F
=
127
12.82
0.0000
41
R-squared
Adj R-squared
Root MSE
=
=
=
0.6958
0.5965
78.0576
-----------------------------------------------------------------------------|
Robust
aidk |
Coef.
Std. Err.
t
P>|t|
[95% Conf. Interval]
-------------+---------------------------------------------------------------fdia |
.0132256
.0113393
1.17
0.246
-.0092857
.0357369
gdp |
.2370975
.4439004
0.53
0.595
-.6441562
1.118351
bop |
1.990006
2.043794
0.97
0.333
-2.067439
6.04745
s | -.1081177
.0835845
-1.29
0.199
-.274054
.0578185
infla |
.1610581
.084145
1.91
0.059
-.0059909
.3281071
lagfdik | -.0089388
.0051734
-1.73
0.087
-.0192094
.0013318
_Icountry_2 | -397.2809
335.0539
-1.19
0.239
-1062.447
267.8853
_Icountry_3 | -412.7739
347.638
-1.19
0.238
-1102.923
277.3747
_Icountry_4 | -390.9655
264.4346
-1.48
0.143
-915.9345
134.0034
_Icountry_5 | -487.5525
322.5936
-1.51
0.134
-1127.982
152.8767
_Icountry_6 | -263.9375
210.5947
-1.25
0.213
-682.0208
154.1457
_Icountry_7 | -365.0384
283.5315
-1.29
0.201
-927.9196
197.8428
_Icountry_8 | -154.7559
224.5134
-0.69
0.492
-600.4714
290.9595
_Iyear_1996 |
11.54945
38.98828
0.30
0.768
-65.85207
88.95097
_Iyear_1997 | -57.93269
37.71147
-1.54
0.128
-132.7994
16.93405
_Iyear_1998 | -30.53556
36.20092
-0.84
0.401
-102.4035
41.33235
_Iyear_1999 |
8.4385
66.54437
0.13
0.899
-123.6688
140.5458
_Iyear_2000 | -99.01842
44.44722
-2.23
0.028
-187.2573
-10.77954
_Iyear_2001 | -4.751173
44.78318
-0.11
0.916
-93.65704
84.15469
_Iyear_2002 | -41.09087
42.94645
-0.96
0.341
-126.3503
44.16861
_Iyear_2003 | -49.88857
41.68241
-1.20
0.234
-132.6386
32.86148
_Iyear_2004 | -54.13739
47.09276
-1.15
0.253
-147.6283
39.35355
_Iyear_2005 | -50.27199
45.59979
-1.10
0.273
-140.799
40.25503
_Iyear_2006 | -97.99766
50.59525
-1.94
0.056
-198.4419
2.446611
_Iyear_2007 | -56.23098
50.61008
-1.11
0.269
-156.7047
44.24273
_Iyear_2008 | -42.46308
42.12743
-1.01
0.316
-126.0966
41.17044
_Iyear_2009 | -56.51236
42.77827
-1.32
0.190
-141.438
28.41323
_Iyear_2010 | -57.96341
37.74526
-1.54
0.128
-132.8972
16.97041
aida |
.107984
.0362373
2.98
0.004
.0360439
.1799241
hdi |
197.392
251.8047
0.78
0.435
-302.5037
697.2876
pop | -2.096124
1.81476
-1.16
0.251
-5.698878
1.50663
_cons |
369.0136
390.0732
0.95
0.347
-405.3796
1143.407
------------------------------------------------------------------------------
Number of obs
Wald chi2(29)
Prob > chi2
R-squared
Root MSE
=
127
= 7848.48
= 0.0000
= 0.9962
= 164.13
-----------------------------------------------------------------------------|
Robust
fdik |
Coef.
Std. Err.
z
P>|z|
[95% Conf. Interval]
-------------+---------------------------------------------------------------aidk |
.365944
.3457708
1.06
0.290
-.3117544
1.043642
fdia |
5.275206
.137554
38.35
0.000
5.005605
5.544806
gdp |
-.03536
.697027
-0.05
0.960
-1.401508
1.330788
bop | -3.883426
3.356176
-1.16
0.247
-10.46141
2.694557
s | -.5759026
1.026894
-0.56
0.575
-2.588578
1.436773
infla |
.5449874
.7126974
0.76
0.444
-.8518738
1.941849
lagfdik | -.1214462
.041677
-2.91
0.004
-.2031316
-.0397607
_Icountry_2 | -32.94913
81.29557
-0.41
0.685
-192.2855
126.3873
_Icountry_3 | -28.36329
83.33979
-0.34
0.734
-191.7063
134.9797
_Icountry_4 |
254.9483
178.1031
1.43
0.152
-94.12738
604.0239
_Icountry_5 |
67.0228
68.38112
0.98
0.327
-67.00174
201.0473
_Icountry_6 | -165.8551
54.241
-3.06
0.002
-272.1655
-59.54472
_Icountry_7 | -327.7702
47.99942
-6.83
0.000
-421.8474
-233.6931
_Icountry_8 |
-261.036
99.06572
-2.63
0.008
-455.2013
-66.87078
_Iyear_1996 | -134.3955
75.95101
-1.77
0.077
-283.2567
14.46578
_Iyear_1997 | -91.30764
75.04342
-1.22
0.224
-238.39
55.77476
_Iyear_1998 | -140.3063
77.53194
-1.81
0.070
-292.2661
11.6535
_Iyear_1999 | -160.2621
83.29842
-1.92
0.054
-323.524
2.999849
_Iyear_2000 | -120.8747
94.73
-1.28
0.202
-306.5421
64.79264
_Iyear_2001 | -29.72452
103.7509
-0.29
0.774
-233.0725
173.6235
_Iyear_2002 | -43.97234
96.0431
-0.46
0.647
-232.2134
144.2687
_Iyear_2003 | -49.48728
89.36801
-0.55
0.580
-224.6454
125.6708
_Iyear_2004 |
-67.5958
90.08821
-0.75
0.453
-244.1654
108.9738
42
_Iyear_2005 | -130.2547
93.13816
-1.40
0.162
-312.8022
52.29269
_Iyear_2006 | -186.0564
83.63181
-2.22
0.026
-349.9718
-22.14109
_Iyear_2007 | -76.68261
145.077
-0.53
0.597
-361.0282
207.663
_Iyear_2008 | -101.6831
105.2958
-0.97
0.334
-308.059
104.6928
_Iyear_2009 | -209.3674
126.4222
-1.66
0.098
-457.1504
38.41566
_Iyear_2010 | -168.6602
109.7717
-1.54
0.124
-383.8087
46.48831
_cons |
56.66896
122.4495
0.46
0.644
-183.3276
296.6655
-----------------------------------------------------------------------------Instrumented: aidk
Instruments:
fdia gdp bop s infla lagfdik _Icountry_2 _Icountry_3
_Icountry_4 _Icountry_5 _Icountry_6 _Icountry_7 _Icountry_8
_Iyear_1996 _Iyear_1997 _Iyear_1998 _Iyear_1999 _Iyear_2000
_Iyear_2001 _Iyear_2002 _Iyear_2003 _Iyear_2004 _Iyear_2005
_Iyear_2006 _Iyear_2007 _Iyear_2008 _Iyear_2009 _Iyear_2010
aida hdi pop
Number of obs
Number of groups
Obs per group:
Number of instruments =
113
Wald chi2(24)
Prob > chi2
=
=
112
8
min =
avg =
max =
14
14
14
=
=
42443.86
0.0000
One-step results
-----------------------------------------------------------------------------fdik |
Coef.
Std. Err.
z
P>|z|
[95% Conf. Interval]
-------------+---------------------------------------------------------------fdik |
L1. | -.0925815
.0105692
-8.76
0.000
-.1132968
-.0718662
|
Dgdp |
-.484664
.6251431
-0.78
0.438
-1.709922
.7405939
bop |
1.757468
2.825973
0.62
0.534
-3.781337
7.296273
Dpop | -96.69941
44.87712
-2.15
0.031
-184.6569
-8.741877
Dhdi | -704.4586
578.7534
-1.22
0.224
-1838.794
429.8772
Ds | -.8772231
.2433398
-3.60
0.000
-1.35416
-.4002858
fdia |
4.946434
.0673946
73.40
0.000
4.814343
5.078525
Dinfla |
5.173003
.5432816
9.52
0.000
4.10819
6.237815
aida |
.0915501
.0513179
1.78
0.074
-.0090312
.1921314
aidk | -.2513535
.1541668
-1.63
0.103
-.5535149
.0508079
_Icountry_2 | (omitted)
_Icountry_3 | (omitted)
_Icountry_4 | (omitted)
_Icountry_5 | (omitted)
_Icountry_6 | (omitted)
_Icountry_7 | (omitted)
_Icountry_8 | (omitted)
_Iyear_1997 | -23.93757
60.42684
-0.40
0.692
-142.372
94.49685
_Iyear_1998 | -111.2851
63.85421
-1.74
0.081
-236.437
13.86687
43
_Iyear_1999 | -70.67638
61.29011
-1.15
0.249
-190.8028
49.45004
_Iyear_2000 | -36.64644
64.53837
-0.57
0.570
-163.1393
89.84643
_Iyear_2001 |
52.5439
61.18118
0.86
0.390
-67.36901
172.4568
_Iyear_2002 | -24.06495
63.76665
-0.38
0.706
-149.0453
100.9154
_Iyear_2003 |
14.32074
62.15292
0.23
0.818
-107.4967
136.1382
_Iyear_2004 |
47.0675
61.21303
0.77
0.442
-72.90783
167.0428
_Iyear_2005 | -15.58507
60.78483
-0.26
0.798
-134.7212
103.551
_Iyear_2006 | -108.2638
68.51926
-1.58
0.114
-242.5591
26.03144
_Iyear_2007 | -46.52771
66.6677
-0.70
0.485
-177.194
84.13857
_Iyear_2008 | -146.7719
83.59141
-1.76
0.079
-310.608
17.06426
_Iyear_2009 | -87.06649
77.09355
-1.13
0.259
-238.1671
64.03408
_Iyear_2010 | -60.63151
67.46406
-0.90
0.369
-192.8586
71.59562
_cons |
23.44438
61.12442
0.38
0.701
-96.35728
143.246
-----------------------------------------------------------------------------Instruments for differenced equation
GMM-type: L(2/.).fdik L(2/.).Dgdp L(2/.).bop L(2/.).Dpop L(2/.).Dhdi
L(2/.).Ds L(2/.).fdia L(2/.).Dinfla
Standard: D.fdia D.aida D.aidk D.Dgdp D.bop D.Ds D.Dhdi D.Dpop D.Dinfla
D.lagfdik D._Iyear_1996 D._Iyear_1997
D._Iyear_1998
D._Iyear_1999
D._Iyear_2000
D._Iyear_2001
D._Iyear_2002 D._Iyear_2003 D._Iyear_2004
D._Iyear_2005
D._Iyear_2006
D._Iyear_2007
D._Iyear_2008
D._Iyear_2009 D._Iyear_2010
Instruments for level equation
Standard: _cons
Postestimation
+ autocorrelation test
. estat abond
artests not computed for one-step system estimator with vce(gmm)
cannot calculate AR tests with dropped variables
Arellano-Bond test for zero autocorrelation in first-differenced errors
cannot calculate test with dropped variables
+-----------------------+
|Order | z
Prob > z|
|------+----------------|
+-----------------------+
H0: no autocorrelation
=
=
.
.
Number of obs
Number of groups
Obs per group:
Number of instruments =
95
Wald chi2(8)
Prob > chi2
=
=
112
8
min =
avg =
max =
14
14
14
=
=
1.84e+13
0.0000
One-step results
(Std. Err. adjusted for clustering on country)
-----------------------------------------------------------------------------|
Robust
fdik |
Coef.
Std. Err.
z
P>|z|
[95% Conf. Interval]
-------------+---------------------------------------------------------------fdik |
44
L1. | -.0978983
.0021155
-46.28
0.000
-.1020447
-.0937519
|
fdia |
4.946891
.0218145
226.77
0.000
4.904135
4.989646
aida |
.0695371
.0405884
1.71
0.087
-.0100148
.149089
aidk | -.2305563
.1028071
-2.24
0.025
-.4320545
-.0290581
Dgdp |
.1905667
.5141329
0.37
0.711
-.8171152
1.198249
bop | -.9810359
1.127324
-0.87
0.384
-3.19055
1.228479
Ds | -1.174967
.0633551
-18.55
0.000
-1.299141
-1.050794
Dhdi |
432.4764
509.8288
0.85
0.396
-566.7696
1431.722
Dpop | -123.2232
98.4091
-1.25
0.211
-316.1015
69.65508
Dinfla |
4.715908
.521552
9.04
0.000
3.693685
5.738131
_cons |
39.05201
141.5108
0.28
0.783
-238.304
316.408
-----------------------------------------------------------------------------Instruments for differenced equation
GMM-type: L(2/.).fdik
Standard: D.fdia D.aida D.aidk D.Dgdp D.bop D.Ds D.Dhdi D.Dpop D.Dinfla
D.lagfdik
Instruments for level equation
Standard: _cons
Postestimation
+ autocorrelation test
. estat abond
artests not computed for one-step system estimator with vce(gmm)
Arellano-Bond test for zero autocorrelation in first-differenced errors
+-----------------------+
|Order | z
Prob > z|
|------+----------------|
|
1 |-1.4059 0.1597 |
|
2 |-1.0025 0.3161 |
+-----------------------+
H0: no autocorrelation
=
=
110.9239
0.0262
45