placestats

FDI inflows vs. Government spending per capita

Holds up after adjusting for income

Across 43 countries, FDI inflows and Government spending per capita rise and fall together at r = -0.58 (on a scale from −1 to +1, where 0 means no link). It holds up almost unchanged when only countries with similar income (GDP per person) are compared (r = -0.58, q = 0.012, allowing for the many pairs tested). Caution: leave-one-out range spans 0.50 in r.

Comparing countries across the middle half of government spending per capita, $21,202 to $34,936, fdi inflows is 9.61% of GDP lower at the top of that range than the bottom. Comparing only countries with similar national income, the gap is 17.8% of GDP.

Link before adjusting (r)-0.582p = 4.3e-5 · 43 countries
After adjusting for national income-0.584p = 4.9e-5 · likely range [-0.75, -0.34]
p, allowing for regions0.000standard error 0.051 · 5 regions
Check for luck (q)0.012across 12,497 pairs

How to read these.r runs from −1 (one goes up as the other goes down) to +1 (they rise together), and 0 means no link. Adjusting for national income means comparing countries with the same GDP per person, so differences in wealth can’t explain the link. Income is used in percentage terms, since an extra $1,000 means more to a poor country than to a rich one. p is how likely a link this strong would be if there were really none. Below 0.05 means it is unlikely to be chance. Very small values are written in short form: 1.1e-32 means a decimal point followed by 31 zeros and then 11, so very close to zero. The likely range is where the true figure probably lies, and a range that crosses zero means the link could easily be chance. Countries in the same region tend to resemble each other, so the third figure allows for that, which gives a fairer p. The standard error is the typical size of the error in r. Finally, testing this many pairs means some will look strong by luck alone. A q below 0.05 means this link is unlikely to be one of those.

FDI inflows · % of GDPlink with income -0.00 · independent
Government spending per capita · current international dollarslink with income +0.92 · proxy

“Link with income” is how closely each measure tracks GDP per person across countries, from −1 to +1.

Every country as a dot

FDI inflows · % of GDP →Government spending per capita · current international dollars →-92.8%5.43%$3,279$72,957Australia: 2.03% of GDP, $29,639Austria: -2.02% of GDP, $41,817Belgium: -3.97% of GDP, $40,194Bulgaria: 3.73% of GDP, $16,433Brazil: 3.41% of GDP, $10,810Canada: 2.98% of GDP, $29,521Switzerland: -1.18% of GDP, $32,409Chile: 4.06% of GDP, $9,208Colombia: 2.53% of GDP, $11,382Costa Rica: 5.43% of GDP, $11,794Czechia: 2.69% of GDP, $24,719Germany: 1.88% of GDP, $36,555Denmark: 4.3% of GDP, $38,309Spain: 1.47% of GDP, $26,400Estonia: -1.78% of GDP, $22,116Finland: -0.0902% of GDP, $37,614France: 2.17% of GDP, $35,798United Kingdom: 1.91% of GDP, $29,093Greece: 2.63% of GDP, $21,055Croatia: 4.88% of GDP, $23,743Hungary: -28.4% of GDP, $22,871Indonesia: 1.54% of GDP, $3,279Ireland: 0.791% of GDP, $31,581Iceland: -0.523% of GDP, $39,385Israel: 4.29% of GDP, $25,449Italy: 0.0346% of GDP, $31,377Japan: 1.03% of GDP, $20,594Korea, Rep.: 0.844% of GDP, $21,401Lithuania: 3.24% of GDP, $21,954Luxembourg: -92.8% of GDP, $72,957Latvia: 0.501% of GDP, $19,891Mexico: 2.35% of GDP, $7,585Netherlands: -1.41% of GDP, $37,878Norway: -1.47% of GDP, $50,329New Zealand: 1.37% of GDP, $23,949Poland: 1.93% of GDP, $24,692Portugal: 4.3% of GDP, $22,321Romania: 2.19% of GDP, $21,349Slovak Republic: 1.33% of GDP, $22,559Slovenia: 2.26% of GDP, $26,764Sweden: 2.86% of GDP, $35,854Turkiye: 0.861% of GDP, $10,287United States: 1.3% of GDP, $34,073AUTCHLDNKHUNIDNLUXMEXNOR

best-fit line line after adjusting

Four ways to measure the link

MethodrpCountries
Standard (Pearson), not adjusted-0.5824.3e-543
By rank (Spearman), not adjusted-0.4420.00343
Standard (Pearson), adjusted for national income-0.5844.9e-543
By rank (Spearman), adjusted for national income-0.0710.65643

The rank version uses only each country’s place in line, from lowest to highest, so a few extreme countries count for less. The adjusted and unadjusted versions use the same 43 countries: those that report both measures and GDP per person. So the gap between them comes from the adjustment, not from a change in which countries are counted. Drop in the size of r after adjusting: -0.003 (a minus sign means it grew).

How solid is it?

Leaving out one country at a time, r ranges from -0.617 (without HUN) to -0.121 (without LUX). The bar above shows that range on a scale from −1 to +1, with the solid line at the full result. The single country that moves r most: LUX (+0.464).

Fragile: this link may not hold up.
  • leave-one-out range spans 0.50 in r
  • correlation moves sharply once outliers are trimmed

Within each region

Countries are not separate, unrelated cases, and neighbors share a lot. A link that holds inside each region is far more believable than one that shows up only when comparing regions.

nr
Europe & Central Asia30-0.56

By income third

If the link shows up only in the richest third of countries, it is a feature of rich countries, not a general pattern.

nr
Poorest third15-0.26
Middle third14+0.08
Richest third14-0.84

By largest religious group

Countries grouped by a label they share, such as main religion, rather than by a number. Groups of fewer than twelve countries are not shown. These groups differ in income, region and history all at once. So a gap between them is a place to start asking questions, not an answer.

nr
Christians35-0.61

Without outliers (countries far outside the middle half of countries on either measure, by more than one and a half times the width of that middle half): r = -0.239 after dropping 3 countries.

Two series, one country

Both measures over the years for one country you pick. The two charts are stacked so they share only the years along the bottom.

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Over time, within countries

Everything above compares countries with each other at one moment. This section compares each country only with itself over 18years. So a link here can’t come from anything about a country that stays the same, such as its history, geography, institutions or culture.

Within countries over time, there is no link that is clearly more than chance (r = -0.103, comparing each country only with itself over the years, and each year only with the same year elsewhere). Whatever the cross-country picture shows, countries whose fdi inflows moved did not tend to see their government spending per capita move with it.

Across countries (adjusted)-0.584for comparison
Within countries-0.128each country vs itself
…and vs the same year elsewhere-0.103q = 0.161 · 43 countries
Year-on-year changes-0.036q = 0.533

757 country-years (one country in one year), 43 countries, 2007–2024, about 18 years each on average. Share of the variation that happens within countries over time: 24% for FDI inflows, 97% for Government spending per capita. The margins of error allow for each country appearing many times, and for each year’s value being close to the year before.

Year-to-year changes are a cautious test, not a final answer. Looking only at changes from one year to the next removes each country’s own trends. But it also makes measurement mistakes louder, which pulls the results toward zero. A near-zero result here is weak evidence of no link, not proof.

With one measure years behind the other

0.30−0.3-100+10years Government spending per capita trails FDI inflows →lag -10: r = -0.028 (n = 375)lag -9: r = -0.086 (n = 418)lag -8: r = -0.108 (n = 461)lag -7: r = -0.080 (n = 504)lag -6: r = -0.091 (n = 547)lag -5: r = -0.067 (n = 590)lag -4: r = -0.067 (n = 633)lag -3: r = -0.130 (n = 674)lag -2: r = -0.150 (n = 712)lag -1: r = -0.117 (n = 751)lag +0: r = -0.103 (n = 757)lag +1: r = -0.220 (n = 757)lag +2: r = -0.249 (n = 757)lag +3: r = 0.011 (n = 757)lag +4: r = -0.001 (n = 757)lag +5: r = 0.007 (n = 757)lag +6: r = -0.243 (n = 756)lag +7: r = -0.090 (n = 755)lag +8: r = -0.001 (n = 754)lag +9: r = 0.030 (n = 753)lag +10: r = -0.004 (n = 752)

Same year (lag 0): -0.103. A peak away from zero does not show which comes first. These series change slowly — this year’s value is close to last year’s. That makes the curve smooth and nearly symmetric, whatever produced the data. Even a sharp peak at one lag (a gap of some years) would not prove that one measure changes the other.

The largest value on this curve (-0.25 at lag +2) is higher than the same-year one by 0.15. That gap is not a finding. It is the largest of 21 closely related estimates, and picking the biggest of many tests always makes it look bigger. That is exactly why nothing on this site is ranked or chosen by lag.

The data


% of GDP
current international dollars		Years
Costa Rica CRI5.43%$11,7942025, 2024
Croatia HRV4.88%$23,7432024
Portugal PRT4.3%$22,3212024
Denmark DNK4.3%$38,3092024
Israel ISR4.29%$25,4492025, 2024
Chile CHL4.06%$9,2082025, 2023
Bulgaria BGR3.73%$16,4332025, 2024
Brazil BRA3.41%$10,8102025, 2021
Lithuania LTU3.24%$21,9542025, 2024
Canada CAN2.98%$29,5212025, 2024
Sweden SWE2.86%$35,8542025, 2024
Czechia CZE2.69%$24,7192025, 2024
Greece GRC2.63%$21,0552024
Colombia COL2.53%$11,3822025, 2024
Mexico MEX2.35%$7,5852025, 2024

World Bank, World Development Indicators
OECD databases as named on each indicator: PISA, Social Expenditure Database (SOCX), Income Distribution Database, Development Assistance Committee statistics, Family Database, Government at a Glance, Corporate Tax Statistics, employment and environment statistics

Sources

FDI inflows

Foreign direct investment, net inflows (% of GDP)

World Bank · CC BY 4.0 · updated quarterly

Government spending per capita

General government expenditure per capita

OECD · via Our World in Data · CC BY 4.0 (OECD terms and conditions) · updated annual, except the snapshots noted per indicator

All levels of government, in current dollars adjusted for what money buys in each country (purchasing power). So it grows over time with inflation as well as differing across countries. Where it is used for adjusting, it is measured in percentage terms (on a log scale), like income. Compared with national income, this measure answers a question nobody is asking. It is money per person set against money per person. So it moves with GDP per capita at about +0.86. Its development loading, which shows how much a measure just reflects how developed a country is, is +0.92. Rich countries spend far more per person because they have far more per person, and almost all of that figure comes from dividing by people. To ask whether government is a larger part of what a country has, you need a share of GDP, not an amount per head. Three measures here do that: government consumption, government expense and tax revenue. Against income those run +0.12, +0.29 and +0.32. That is a much smaller answer, and the real one.

How this was computed

Data used: most recent value in 2010-2025; values come from 2020–2025. To adjust for income, each measure is first predicted from GDP per person (in percentage terms, on a log scale) with a straight-line fit. Only what is left over is then compared. This is called a partial correlation. The line is drawn the standard way (ordinary least squares), which picks the line that comes closest to all the countries at once. The error margins allow for countries in the same region resembling each other, using 5 World Bank regions. The q-value corrects for testing all 12,497 pairs at once, using the Benjamini–Hochberg method. Underlying data last updated DYB 2024. How the country data works · explore FDI inflows and Government spending per capita

This page shows that two measures go together. It does not show that FDI inflows changes Government spending per capita, or the reverse. These figures also describe countries, not individual people. See the ecological fallacy.

More links with FDI inflows or Government spending per capita