providing entry into a protected domestic market with prices higher than what they would be in competitive markets. _Applied tariff rates_ are the proxy for trade openness. The data come from UNCTAD Statistics, Catalogue of International Trade under the “Market Access” category. Alternative measures of trade policies are also used, such as the ratio of imports and exports to GDP and the Overall Trade Restrictiveness Index, available from the World Bank’s WDI.<sup>24</sup>

**_Energy Availability:_** Availability of energy is a key determinant for any kind of investment in the production sector, and its scarcity may be a big deterrent of FDI in developing countries (UNCTAD 1998).<sup>25,26</sup> In this study, we measure energy efficiency by _electric power transmission and distribution losses (percent of output)_ , available from the World Bank’s WDI.

**_Natural Resources:_** Natural resource availability has often been studied as a determinant of FDI.<sup>27</sup> It captures both the incentives for investments to exploit countries’ natural resources and the availability of productive inputs. We measure natural resources on a per capita basis to control for population size. The data include oil and natural gas as well as other resources. However, the marginal impact of this variable is primarily non-oil and natural gas resources because we include a dummy variable to capture the particular structure of oil-exporting economies. The variable is measured in thousands of US dollars per capita and includes the estimated discounted present value of _Crops, Pasture Land, Timber, Non-Timber Forest, Protected Areas, Oil, Natural Gas, Coal, and Minerals resources._ The estimates, produced by the World Bank staff, are available in _The Changing Wealth of Nations_ catalogue.

**_Financial Development:_** On one hand, financially developed economies ensure the availability of required capital for production and may act as an FDI deterrent. On the other hand, financial deepening can also decrease transaction costs of investment and facilitate all sorts of financing activities, thus playing a key role in attracting FDI (Al Nasser and Gomez 2009). As in other studies, financial development is measured by the private credit to GDP ratio, available from the World Bank’s WDI.<sup>28</sup>

**_Labor Costs:_** Low labor costs may be associated with greater FDI inflows—if accurately measured in a model that accounts for differences in worker productivity. Labor costs have been included in previous studies examining FDI (e.g. (Eichengreen and Tong 2007). We proxy labor cost  using the gross average real monthly wage in local currency, available at the ILOSTAT Database produced by the International Labor Organization (ILO).

> 24 Please refer to (Gastanaga, Nugent and Pashamova 1998) to learn about different measures of openness.

> 25 For example, see (Noorbakhsh, Paloni and Youssef 2001), and (Wilhelms 1998).

> 26 Energy-investment relationship is detailed in a global corporate survey by PricewaterhouseCoopers 2012.

> 27 For example, see (UNCTAD 1993, 1998), (McKern 1996), (Asiedu 2002), (Mohamed and Sidiropoulos 2010), and (Anyanwu 2012).

> 28 For example, see (Demirgüç-Kunt and Beck 2009) and (Beck, Demirgüç-Kunt and Levine 2000).

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