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Does Contract Risk Impede Foreign Direct Investment?

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  • Peter Egger
  • Hannes Winner

Abstract

This paper analyzes the impact of contract-related risk factors on inward foreign direct investment. We presume that risk related determinants enter directly the cost function of multinationals. For a sample of 50 developed and less developed countries and the time period 1985-1997 we find a clear negative relationship between contract risk and FDI. Further, a simulation analysis reveals that the observed change in contract risk has equalized the international distribution of inward foreign direct investment.

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Bibliographic Info

Article provided by Swiss Society of Economics and Statistics (SSES) in its journal Swiss Journal of Economics and Statistics.

Volume (Year): 139 (2003)
Issue (Month): II (June)
Pages: 155-172

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Handle: RePEc:ses:arsjes:2003-ii-2

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Keywords: Contract risk; Corruption; Foreign direct investment; Panel econometrics;

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Citations

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Cited by:
  1. Vadlamannati, Krishna Chaitanya, 2009. "Growth effects of foreign direct investment and economic policy reforms in Latin America," MPRA Paper 14133, University Library of Munich, Germany.
  2. repec:clg:wpaper:2010-26 is not listed on IDEAS
  3. Egger, Peter & Winner, Hannes, 2005. "Evidence on corruption as an incentive for foreign direct investment," European Journal of Political Economy, Elsevier, vol. 21(4), pages 932-952, December.
  4. Vadlamannati, Krishna Chaitanya, 2009. "Growth effects of U.S. FDI in 64 developing economies, 1980 – 2007: The role of absoptive capabilities," MPRA Paper 14709, University Library of Munich, Germany.

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