Naslov
New insights into Lucas paradox

Autori
Visković, Josip ; Burnać, Paško ; Tolj, Ante

Vrsta, podvrsta i kategorija rada
Radovi u zbornicima skupova, cjeloviti rad (in extenso), znanstveni

Izvornik
RED 2021: 10th International Scientific Symposium Region, Entrepreneurship, Development: Proceedings / Leko Šimić, Mirna ; Crnković, Boris - Osijek : Ekonomski fakultet Sveučilišta Josipa Jurja Strossmayera u Osijeku, 2021, 1096-1104

Skup
10th International Scientific Symposium Region, Entrepreneurship, Development, RED 2021

Mjesto i datum
Online, 17.06.2021

Vrsta sudjelovanja
Predavanje

Vrsta recenzije
Međunarodna recenzija

Ključne riječi
Lucas paradox ; FDI ; institutional quality ; panel data analysis

Sažetak
Contrary to neoclassical theory, which states that capital should flow from rich to poor countries, the Lucas paradox shows that capital does not flow from developed to developing countries. More specifically, little capital flows from rich to poor countries. The Lucas paradox is theoretically explained by both differences in fundamentals and capital market imperfections. Among differences in fundamentals, the role of institutions is often defined as crucial, but the papers do not explain which element of the quality of institutions ultimately matters. Moreover, recent studies have not included the post-financial crisis period. Therefore, this paper examines the elements of institutional quality: voice and accountability, Political Stability and non- violence ; Government Effectiveness ; Regulatory Quality ; Rule of Law and Corruption Control as determinants of capital flows. More specifically, this paper analyses the impact of institutional quality and selected macroeconomic variables on foreign direct investment. Indeed, foreign direct investment has a positive impact on capital accumulation and enables the transfer of technology and knowledge, which supports economic growth and development. Data for 149 countries for the period 2012 - 2019 are obtained from the World Government Indicators and the World Bank. Using dynamic panel data analysis, we find that the quality of institutions is still the leading variable in explaining the Lucas Paradox, with all elements being important. This result should be of great importance to policy makers in developing countries as they should strive to improve the quality of nstitutions in order to attract foreign direct investment as an important factor for economic growth and development.

Izvorni jezik
Engleski

Znanstvena područja
Ekonomija

POVEZANOST RADA