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Democracy and FDI

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Author Info
Busse, Matthias

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Abstract

Many believe that multinational enterprises insensitively ignore political rights and civil liberties in the countries of their investments. Frequently, non-governmental organisations accuse multinationals of fostering repressive regimes in developing countries and consider foreign direct investment (FDI) as a tool of exploitation. This paper tries to examine empirically the complex relationship between democracy and FDI in a systematic way, using cross-sectional and panel data analysis. The results indicate that - on average - investments by multinationals are significantly higher in democratic countries, thereby refuting the hypothesis that political repression fosters FDI. Yet this positive link does not hold for the 1970s, when a considerable share of FDI flowed to countries with repressive regimes.

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Publisher Info
Paper provided by Hamburg Institute of International Economics in its series Discussion Paper Series with number 26260.

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Date of creation: 2003
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Handle: RePEc:ags:hiiedp:26260

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Related research
Keywords: FDI; Democracy; Political Rights; Civil Liberties; Political Economy; C31; C 33; F21; F23;

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Philipp Harms & Heinrich W. Ursprung, 2002. "Do Civil and Political Repression Really Boost Foreign Direct Investments?," Economic Inquiry, Oxford University Press, vol. 40(4), pages 651-663, October.
    Other versions:
  2. Chakrabarti, Avik, 2001. "The Determinants of Foreign Direct Investment: Sensitivity Analyses of Cross-Country Regressions," Kyklos, Blackwell Publishing, vol. 54(1), pages 89-113.
  3. Reinhart, Carmen & Rogoff, Kenneth, 2004. "The modern history of exchange rate arrangements: A reinterpretation," MPRA Paper 14070, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  4. Alesina, Alberto & Rodrik, Dani, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 465-90, May. [Downloadable!] (restricted)
    Other versions:
  5. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November. [Downloadable!] (restricted)
  6. John F. Helliwell, 1994. "Empirical Linkages Between Democracy and Economic Growth," NBER Working Papers 4066, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Toke A. Aidt & Facundo Albornoz, 2007. "An Economic Theory of Political Institutions: Foreign Intervention and Overseas Investments," Discussion Papers 07-03, Department of Economics, University of Birmingham. [Downloadable!]
  2. Sandro Maffei & Nicole Raabe & Heinrich Ursprung, 2004. "Political Repression and Child Labor: Theory and Empirical Evidence," Working Papers of the Research Group Heterogenous Labor 04-19, Research Group Heterogeneous Labor, University of Konstanz/ZEW Mannheim. [Downloadable!]
    Other versions:
  3. Selen Guerin & Stefano Manzocchi, 2009. "Political regime and FDI from advanced to emerging countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 145(1), pages 75-91, April. [Downloadable!] (restricted)
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This page was last updated on 2009-12-26.

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