Do Language Structures Influence Foreign Direct Investment Behavior Across Countries?

Many studies have investigated the link between economic growth and private capital flows through foreign direct investment (FDI), and have found significant evidence that FDI is correlated with economic growth. Other papers have studied the effect of the quality of government institutions on investment and economic growth. Researchers have also looked at the effect of cultural parameters on economic growth. At the micro-economic level cultural factors such as a language's future tense reference (FTR) sentence structure, have been found to have a strong and lasting effect on the savings behaviors of individuals within a country (Chen 2013). In this study, I bring together previously studied determinants of investment behavior and undertake a cross-country macroeconomic analysis of culture on economic growth. I use the language FTR data compiled by Chen (2013) to analyze its effect on foreign direct investment while controlling for institutional quality and other determinants of FDI. This research is of importance to economists because it helps to highlight an underlying determinant of differences in economic growth rates between countries and can help to inform future initiatives to stimulate economic growth.