We have also explored the interaction of FDI with indicators of distortions in
the trade regime, as measured by tariffs, and in the capital account of the balance
of payments, which was proxied by the parallel market premium for foreign
15 exchange. In both cases, however, the interaction term was not statistically
significant. Thus, this type of distortion does not appear to have affected the nature
of FDI flows in a significant way, at least as far as can be detected in this sample.
We also incorporated in the regression an interaction term between human capital
and initial income as suggested by the model, where the speed of convergence is
increasing in the level of human capital, but the coefficient was not significant.