Studying the impact of foreign direct investment on urbanization: The case of Southeast Asian countries

Abstract

Foreign direct investment plays an important role in the urbanization process in Southeast Asia, helping to develop infrastructure, create jobs, promote industrialization and urban modernization. The study uses balanced panel data from 11 Southeast Asian countries during the period of 2010-2023 to assess the impact of foreign direct investment on urbanization. The study uses the pooled regression model (OLS), fixed effects model (FEM), random effects model (REM) combined with necessary tests to select the appropriate model. After testing the defects, the study uses the generalized least squares model (FGLS) to overcome. The regression results show that foreign direct investment has a positive and significant impact on urbanization in Southeast Asian countries. In addition, the study also found negative impacts of economic growth and positive impacts of structural, openness and environmental variables on urbanization in these countries.