000133249 001__ 133249 000133249 005__ 20250923084426.0 000133249 0247_ $$2doi$$a10.1108/AEA-08-2023-0337 000133249 0248_ $$2sideral$$a137959 000133249 037__ $$aART-2024-137959 000133249 041__ $$aeng 000133249 100__ $$aWang, Dongni 000133249 245__ $$aMaking Aid Work: Institutional Thresholds and FDI 000133249 260__ $$c2024 000133249 5060_ $$aAccess copy available to the general public$$fUnrestricted 000133249 5203_ $$aPurpose – The purpose of this paper is to analyse the institutional threshold effects of foreign aid on FDI. Design/methodology/approach – This paper develops a theoretical model from an extended Solow model that introduces the conductive effect of institutions in an aid recipient country towards the capacity of attracting FDI. We evidence threshold effects with the most recent panel threshold models that consider endogeneity issues. The data on economic institutions and foreign aid are decomposed into disaggregated level to reveal the detailed threshold pattern. Several sample subsets are used for a heterogeneity analysis. Findings – Conducting empirical research on a sample of 62 countries during the period 2003-2016, we find robust evidence of the existence of an institutional threshold in the aid-FDI nexus which a country must attain to reap the full attraction of FDI by foreign aid providing financial resources. Furthermore, foreign aid tends to promote FDI in institutions characterized by a right-sized government, a strengthened legal system, and an appropriate regulatory environment. On the other hand, aid may crowd out FDI. The results are robust to regional combinations and a subset of low and lower-middle income countries. In addition, we find that aid targeted at social infrastructure and services has a positive effect regardless of institutional threshold. Originality/value –This paper contributes to the literature by introducing a non-linear and discontinuous effect of aid on FDI, i.e., a threshold effect, highlighting the relevance of legal systems and regulations and the possibility of a crowding-out effect on FDI for specific institutional regimes. The thresholds provide a guide for donor countries to ensure aid effectiveness at the risk of being counterproductive, and for recipient countries to better assess the institutional dimensions that need to be improved. 000133249 536__ $$9info:eu-repo/grantAgreement/ES/DGA/S44-17R 000133249 540__ $$9info:eu-repo/semantics/openAccess$$aby$$uhttp://creativecommons.org/licenses/by/3.0/es/ 000133249 590__ $$a2.5$$b2024 000133249 592__ $$a0.433$$b2024 000133249 591__ $$aECONOMICS$$b153 / 617 = 0.248$$c2024$$dQ1$$eT1 000133249 593__ $$aEconomics, Econometrics and Finance (miscellaneous)$$c2024$$dQ2 000133249 655_4 $$ainfo:eu-repo/semantics/article$$vinfo:eu-repo/semantics/publishedVersion 000133249 700__ $$0(orcid)0000-0002-9076-3743$$aFillat Castejón, Carmen$$uUniversidad de Zaragoza 000133249 7102_ $$14014$$2225$$aUniversidad de Zaragoza$$bDpto. Economía Aplicada$$cÁrea Economía Aplicada 000133249 773__ $$g32, 96 (2024), 189-206$$pAppl. econ. anal.$$tApplied Economic Analysis$$x2632-7627 000133249 85641 $$uhttps://www.emerald.com/insight/content/doi/10.1108/aea-08-2023-0337/full/pdf$$zTexto completo de la revista 000133249 8564_ $$s190155$$uhttps://zaguan.unizar.es/record/133249/files/texto_completo.pdf$$yVersión publicada 000133249 8564_ $$s1939536$$uhttps://zaguan.unizar.es/record/133249/files/texto_completo.jpg?subformat=icon$$xicon$$yVersión publicada 000133249 909CO $$ooai:zaguan.unizar.es:133249$$particulos$$pdriver 000133249 951__ $$a2025-09-22-14:39:52 000133249 980__ $$aARTICLE