The Determinants of FDI in Portugal

Foreign Direct Investment (FDI) has experienced a dramatic rise in Portugal in the last three decades, which was essential for the convergence process of the country with the European Union. Many authors have already studied the determinants of FDI, but few have analyzed them at sectoral level. Indeed, the motivations that lead the choices of foreign investors vary according to the sector invested. Therefore, the present master's thesis is a pioneer study whose main objective is to identify the determinants of FDI in Portugal, in nine economic activities. In order to assess that, two models were constructed using the OLS estimator with time series data from 1980 to 2009 for the Portuguese economy. Using the results obtained, it is possible to elaborate a set of more cost-effective policies aimed to improve the attractiveness of the country for foreign multinational enterprises and, consequently, take advantage of the externalities created by bigger flows of FDI.