In the literature, the ratio of trade (imports + exports) to GDP is often used as a measure of openness of an economy. 12 This ratio is also often interpreted as a measure of trade restrictions. The impact of openness on FDI depends on the type of investment. When investments are market-seeking, trade restrictions (and therefore less openness) can have a positive impact on FDI. The reason stems from the ''tariff jumping'' hypothesis, which argues that foreign firms that seek to serve local markets may decide to set up subsidiaries in the host country if it is difficult to import their products to the country. In contrast, multinational firms engaged in export-oriented investments may prefer to locate in a more open economy since increased imperfections that accompany trade protection generally imply higher transaction costs associated with exporting. As discussed previously, FDI for my sample is less likely to be market-seeking and therefore I hypothesize a positive relationship between openness and FDI.