This paper aims to study the mediation effects of Foreign direct investment (FDI) on
the relationship between transportation infrastructure and economic growth in Lao people’s
Democratic Republic (Lao PDR) by using Sobel test. This study is quantitative research using
panel data from 2013 to 2022. The regression results conclude that there is a positive
relationship between transportation infrastructure and FDI by p-value=0.01. In addition,
there is a positive relationship between FDI and Economic growth by significance at 0.05.
Result demonstrates that there is direct effect and indirect effect between transportation
infrastructure and Economic growth and Sobel test found that FDI was a partial mediator of
the relationship between transportation infrastructure and Economic growth as well.
In summary, transportation infrastructure enhances the attractiveness and efficiency of
a region, drawing in FDI. The resultant FDI brings in capital, technology, and expertise,
stimulating economic activities and contributing to overall economic growth. This mediating
role of FDI underscores the interconnectedness of transportation infrastructure development,
investment attraction, and economic growth.