International Journal of Multidisciplinary Evolutionary Research
Impact of Economic Freedom on FDI Inflows: A Comparative Study on Developing and Least Developed Country Groups
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This is an author-deposited copy. The version of record was originally published elsewhere: Originally published in International Journal of Multidisciplinary Evolutionary Research. ISSN 3051-3502. Volume 7 Issue 2. Pages 01-07. Published 2026-01-01. DOI 10.54660/IJMER.2026.7.2.01-07 . Source: https://www.internationalmultiresearch.com/article/3165/impact-of-economic-freedom-on-fdi-inflows-a-comparative-study-on-developing-and-least-developed
Abstract
The purpose of this paper is to investigate differences in the impact of economic freedom on FDI inflows between developing and least developed country groups. The study is conducted with 100 developing and least developed countries as classified by the United Nations in the period from 2005 to 2022. The Index of Economic Freedom published by the Heritage Foundation is employed and made use of its nine sub-indices. Applying two-step system GMM estimator, the finding reveals that aspects of economic freedom including property right, government integrity, monetary freedom, business freedom and investment freedom play as FDI stimulus factors in both developing and least developed country groups. Labor freedom and trade freedom have a positive effect on FDI inflows in least developed countries, while in developing countries, their effects are negative. Reduction in tax burden encourages the influx of FDI in least developed countries and has none effect in developing countries.
Keywords: Developing and least developed countriesEconomic freedomFDI inflows
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