Inward FDI Determinants: The case of the Netherlands

The Netherlands is one of the largest receivers of FDI in the world. It is interesting to study as other small economies may benefit from such research. Using data for 17 investing countries, over the period 2001-2010, the study aims at unravelling the major determinants of FDI. Geographic and linguistic distance as well as the investing country’s GDP per capita significantly deter the amount of investments received by the Dutch economy. A relatively high Dutch wage proves to be a significant and attractive FDI determinant, as it may signal high worker productivity. Like all macroeconomic factors, no clear cut evidence on the tax rate has been obtained. We find evidence for a substitution effect between exports and FDI, but this result is statistically fragile