Socio – Economic Factors Affecting Foreign Direct Investment in Pakistan

Abstract

Most of the developing countries facing the problem of capital shortage, one of
the important reasons of it is low productivity or growth. These nations are
intense need of capital inflow to reduce the mismatch is capital flow. FDI is one
of the sources to over it or reduce it. Pakistan is one of the developing countries
having lake of capital. Therefore, this aimed to investigate Socio-economic
factors affecting FDI inflows to Pakistan. For this purpose, annual time series
data is put into ARDL estimation technique. Stationarity tests are also used to
know about the order of Stationarity. The results of estimation technique show
that the cheap labors force significantly affect the inflow of FDI. Political
instability and growth of GDP have also positive association with FDI inflow.
Other important variables which are put into investigation and founded
significant are related to nature of government and role of and quality of
institutions. This study suggests on the bases of the findings that policy makers
may give proper attention towards the quality of labor force which to be
improved with education and skill. Institutional role and quality should be
improved to attract more FDI to reduce or overcome capital shortage.