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Does Foreign Direct Investment Decrease Corruption?

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Author Info

  • Felipe Larraín

    ()
    (Instituto de Economía)

  • José Tavares

Abstract

This paper assesses the effect of openness on corruption, using foreign direct investment (FDI) inflows as a measure of openness, after trade intensity is accounted for. We use a broad cross section of countries over the period 1970 to 1994 and address th

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Bibliographic Info

Article provided by Instituto de Economía. Pontificia Universidad Católica de Chile. in its journal Cuadernos de Economía-Latin American Journal of Economics.

Volume (Year): 41 (2004)
Issue (Month): 123 ()
Pages: 217-230

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Handle: RePEc:ioe:cuadec:v:41:y:2004:i:123:p:217-230

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Keywords: Foreign Direct Investment; Corruption; International Trade; Istrumental Variables;

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References

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  1. Shang-Jin Wei, 2000. "Natural Openness and Good Government," NBER Working Papers 7765, National Bureau of Economic Research, Inc.
  2. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, . "The Quality of Government," Working Paper 19452, Harvard University OpenScholar.
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  7. Shang-Jin Wei, 2000. "How Taxing is Corruption on International Investors?," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 1-11, February.
  8. Gatti, Roberta, 1999. "Corruption and trade tariffs, or a case for uniform tariffs," Policy Research Working Paper Series 2216, The World Bank.
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  10. Rose-Ackerman, Susan, 1975. "The economics of corruption," Journal of Public Economics, Elsevier, vol. 4(2), pages 187-203, February.
  11. Aaron Tornell & Philip R. Lane, 1998. "Voracity and Growth," NBER Working Papers 6498, National Bureau of Economic Research, Inc.
  12. Rafael Di Tella & Alberto Ades, 1999. "Rents, Competition, and Corruption," American Economic Review, American Economic Association, vol. 89(4), pages 982-993, September.
  13. Shang-Jin Wei, 1997. "Why is Corruption So Much More Taxing Than Tax? Arbitrariness Kills," NBER Working Papers 6255, National Bureau of Economic Research, Inc.
  14. Vito Tanzi, 1994. "Corruption, Governmental Activities, and Markets," IMF Working Papers 94/99, International Monetary Fund.
  15. Barro, Robert J. & Lee, Jong-Wha, 1994. "Sources of economic growth," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 40(1), pages 1-46, June.
  16. Vito Tanzi, 1998. "Corruption Around the World," IMF Working Papers 98/63, International Monetary Fund.
  17. Carlos Leite & Jens Weidmann, 1999. "Does Mother Nature Corrupt," IMF Working Papers 99/85, International Monetary Fund.
  18. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
  19. Fisman, Raymond & Gatti, Roberta, 2000. "Decentralization and corruption - evidence across countries," Policy Research Working Paper Series 2290, The World Bank.
  20. Bliss, Christopher & Di Tella, Rafael, 1997. "Does Competition Kill Corruption?," Journal of Political Economy, University of Chicago Press, vol. 105(5), pages 1001-23, October.
  21. Vito Tanzi & Hamid Reza Davoodi, 1997. "Corruption, Public Investment, and Growth," IMF Working Papers 97/139, International Monetary Fund.
  22. Vito Tanzi, 1998. "Corruption Around the World: Causes, Consequences, Scope, and Cures," IMF Staff Papers, Palgrave Macmillan, vol. 45(4), pages 559-594, December.
  23. Bhagwati, Jagdish N, 1982. "Directly Unproductive, Profit-seeking (DUP) Activities," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 988-1002, October.
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Citations

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Cited by:
  1. Karpaty, Patrik & Tingvall, Patrik Gustavsson, 2011. "Offshoring of Services and Corruption: Do Firms Escape Corrupt Countries?," Working Paper Series in Economics and Institutions of Innovation 243, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
  2. Fathi Ali & Norbert Fiess & Ronald MacDonald, 2009. "Climbing to the top? Foreign Direct Investment and property rights," Working Papers 2009_01, Business School - Economics, University of Glasgow.
  3. Paulo Júlio & Ricardo Pinheiro-Alves & José Tavares, 2013. "Foreign direct investment and institutional reform: evidence and an application to Portugal," Working Papers w201306, Banco de Portugal, Economics and Research Department.
  4. Gueorguiev, Dimitar & Malesky, Edmund, 2012. "Foreign investment and bribery: A firm-level analysis of corruption in Vietnam," Journal of Asian Economics, Elsevier, vol. 23(2), pages 111-129.
  5. John Ahlquist & Aseem Prakash, 2010. "FDI and the costs of contract enforcement in developing countries," Policy Sciences, Springer, vol. 43(2), pages 181-200, June.
  6. Asongu, Simplice & Jellal, Mohamed, 2014. "International aid corruption and fiscal behavior policy," MPRA Paper 57192, University Library of Munich, Germany.
  7. Alexander Libman, 2006. "Government-Business Relations and Catching Up Reforms in the CIS," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 3(2), pages 263-288, December.
  8. dumludag, devrim, 2009. "Political Institutions and Foreign Direct Investment Flows into Developing Countries," MPRA Paper 27327, University Library of Munich, Germany, revised 02 Feb 2010.
  9. Asongu Simplice & Mohamed Jellal, 2013. "On the channels of foreign aid to corruption," Working Papers 13/018, African Governance and Development Institute..
  10. Markus Alzer & Ramin Dadasov, 2012. "Financial Liberalization and Institutional Development," FIW Working Paper series 082, FIW.
  11. Damien Bazin & Marko Danon, 2009. "Influence of the Corruption on the FDI Level, Case of Serbia," Book Chapters, Institute of Economic Sciences.
  12. Dang, Duc Anh, 2013. "How foreign direct investment promote institutional quality: Evidence from Vietnam," Journal of Comparative Economics, Elsevier, vol. 41(4), pages 1054-1072.
  13. Berdiev, Aziz N. & Kim, Yoonbai & Chang, Chun-Ping, 2013. "Remittances and corruption," Economics Letters, Elsevier, vol. 118(1), pages 182-185.
  14. Saha, Shrabani & Gounder, Rukmani & Su, Jen-Je, 2009. "The interaction effect of economic freedom and democracy on corruption: A panel cross-country analysis," Economics Letters, Elsevier, vol. 105(2), pages 173-176, November.
  15. Tingvall, Patrik Gustavsson, 2010. "Offshoring and Corruption: Does Corruption Matter," Working Paper Series in Economics and Institutions of Innovation 237, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.

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