Determinants of Foreign Direct Investment in Ireland

Abstract: Exceptionally high FDI inflows into Ireland have been one of the main resources of Irish rapid economic growth, and earned the country a title of “Celtic Tiger”.  The goal of this thesis is to find out the driving sources behind this high inward investment and to examine whether Ireland has truly enjoyed higher amounts of FDI inflows than predicted by the model. This thesis analyzes the determinants of foreign direct investment in Ireland. The determinants being examined are GDP, GDP per capita, infrastructure, labor productivity, education and trade openness. The analyzed period is from 1997 to 2007 and data is collected for 30 OECD member states. With the help of the pooled regression we were able to obtain the following results: GDP, GDP per capita, infrastructure and education have a significant effect on FDI and FDI per capita inflows. However, labor productivity and trade openness turned out to be less significant in attracting FDI to Ireland. Moreover, based on the results, infrastructure had an unexpected negative sign, while the rest of the variables indicated expected positive relation to FDI.