Enhancing Foreign Direct Investment via Transparency? Evaluating the Effects of the EITI on FDI
AbstractThe so called resource curse, the fact that countries rich in natural resources often show lower rates of economic growth compared to resource-poor countries, is commonly attributed to the low quality of governance in resource-rich countries. The Extractive Industries Transparency Initiative (EITI) was founded in 2003 to address this problem through increasing the quality of the public financial management of resource flows. By joining this initiative, governments show their willingness to reform and to improve their governance. As the quality of governance is an important factor for investors in deciding where to invest, this signal has the potential to improve a country’s appeal for foreign direct investment (FDI). This study shows in a panel of 81 countries that joining the EITI increases the ratio of FDI inflows to GDP on average by around two percentage points. This is a remarkable increase given that the average ratio of FDI inflows to GDP in the sample is five percent. The results are robust when controlling for selection bias due to the voluntary decision to join the initiative and possible endogeneity of the candidate variable.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Heidelberg, Department of Economics in its series Working Papers with number 538.
Date of creation: 24 Jan 2013
Date of revision:
Note: This paper is part of http://archiv.ub.uni-heidelberg.de/volltextserver/view/schriftenreihen/sr-3.html
Contact details of provider:
Postal: Grabengasse 14, D-69117 Heidelberg
Phone: +49-6221-54 2905
Fax: +49-6221-54 2914
Web page: http://www.awi.uni-heidelberg.de/
More information through EDIRC
FDI; EITI; Corruption; Natural Resources.;
This paper has been announced in the following NEP Reports:
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.:
- Heckman, James, 2013.
"Sample selection bias as a specification error,"
Applied Econometrics, Publishing House "SINERGIA PRESS",
Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
- Asiedu, Elizabeth & Lien, Donald, 2011. "Democracy, foreign direct investment and natural resources," Journal of International Economics, Elsevier, Elsevier, vol. 84(1), pages 99-111, May.
- Halvor Mehlum & Karl Moene & Ragnar Torvik, 2002.
"Institutions and the resource curse,"
Development and Comp Systems
- Mehlum, Halvor & Moene, Karl-Ove & Torvik, Ragnar, 2003. "Institutions and the resource curse," Memorandum, Oslo University, Department of Economics 29/2002, Oslo University, Department of Economics.
- Halvor Mehlum & Karl Moene & Ragnar Torvik, 2002. "Institutions and the resource curse," GE, Growth, Math methods, EconWPA 0210004, EconWPA.
- Halvor Mehlum & Karl Moene & Ragnar Torvik, 2004. "Institutions and the Resource Curse," DEGIT Conference Papers, DEGIT, Dynamics, Economic Growth, and International Trade c009_012, DEGIT, Dynamics, Economic Growth, and International Trade.
- Graham Bird & Dane Rowlands, 2007.
"The IMF's Role in Mobilizing Private Capital Flows: Are There Grounds for Catalytic Conversion?,"
School of Economics Discussion Papers, School of Economics, University of Surrey
0207, School of Economics, University of Surrey.
- Graham Bird & Dane Rowlands, 2009. "The IMF's role in mobilizing private capital flows: are there grounds for catalytic conversion?," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 16(17), pages 1705-1708.
- Arellano, Manuel & Bover, Olympia, 1995.
"Another look at the instrumental variable estimation of error-components models,"
Journal of Econometrics, Elsevier,
Elsevier, vol. 68(1), pages 29-51, July.
- M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
- Eduardo Borensztein & Jose De Gregorio & Jong-Wha Lee, 1995.
"How Does Foreign Direct Investment Affect Economic Growth?,"
NBER Working Papers
5057, National Bureau of Economic Research, Inc.
- Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998. "How does foreign direct investment affect economic growth?1," Journal of International Economics, Elsevier, Elsevier, vol. 45(1), pages 115-135, June.
- Dreher, Axel & Voigt, Stefan, 2011.
"Does membership in international organizations increase governments' credibility? Testing the effects of delegating powers,"
Journal of Comparative Economics,
Elsevier, vol. 39(3), pages 326-348, September.
- Axel Dreher & Stefan Voigt, 2008. "Does Membership in International Organizations Increase Governments’ Credibility? Testing the Effects of Delegating Powers," MAGKS Papers on Economics, Philipps-UniversitÃ¤t Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) 200819, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
- Axel Dreher & Stefan Voigt, 2008. "Does Membership in International Organizations Increase Governments’ Credibility? Testing the Effects of Delegating Powers," KOF Working papers, KOF Swiss Economic Institute, ETH Zurich 08-193, KOF Swiss Economic Institute, ETH Zurich.
- Axel Dreher & Stefan Voigt, 2008. "Does Membership in International Organizations Increase Governments’ Credibility? Testing the Effects of Delegating Powers," CESifo Working Paper Series 2285, CESifo Group Munich.
- Méon, Pierre-Guillaume & Sekkat, Khalid, 2012.
"FDI Waves, Waves of Neglect of Political Risk,"
World Development, Elsevier,
Elsevier, vol. 40(11), pages 2194-2205.
- Pierre-Guillaume Méon & Khalid Sekkat, 2010. "FDI waves, waves of neglect of political risk," Working Papers CEB, ULB -- Universite Libre de Bruxelles 10-004.RS, ULB -- Universite Libre de Bruxelles.
- Pierre-Guillaume Méon & Khalid Sekkat, 2012. "FDI Waves, Waves of Neglect of Political Risk," ULB Institutional Repository 2013/132815, ULB -- Universite Libre de Bruxelles.
- Hans Pitlik & Björn Frank & Mathias Firchow, 2010. "The demand for transparency: An empirical note," The Review of International Organizations, Springer, Springer, vol. 5(2), pages 177-195, June.
- R Blundell & Steven Bond, .
"Initial conditions and moment restrictions in dynamic panel data model,"
W14&104., Economics Group, Nuffield College, University of Oxford.
- Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, Elsevier, vol. 87(1), pages 115-143, August.
- Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers, Institute for Fiscal Studies W95/17, Institute for Fiscal Studies.
- Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
- Hefeker, Carsten & Busse, Matthias, 2005.
"Political Risk, Institutions and Foreign Direct Investment,"
HWWA Discussion Papers
315, Hamburg Institute of International Economics (HWWA).
- Busse, Matthias & Hefeker, Carsten, 2007. "Political risk, institutions and foreign direct investment," European Journal of Political Economy, Elsevier, vol. 23(2), pages 397-415, June.
- Jensen, Nathan M., 2003. "Democratic Governance and Multinational Corporations: Political Regimes and Inflows of Foreign Direct Investment," International Organization, Cambridge University Press, Cambridge University Press, vol. 57(03), pages 587-616, June.
- 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.
- Kolstad, Ivar & Søreide, Tina, 2009. "Corruption in natural resource management: Implications for policy makers," Resources Policy, Elsevier, Elsevier, vol. 34(4), pages 214-226, December.
- Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, Econometric Society, vol. 49(6), pages 1417-26, November.
- Bird, Graham, 2002. "The credibility and signalling effect of IMF programmes," Journal of Policy Modeling, Elsevier, Elsevier, vol. 24(9), pages 799-811, December.
- Molly Bauer & Cesi Cruz & Benjamin Graham, 2012. "Democracies only: When do IMF agreements serve as a seal of approval?," The Review of International Organizations, Springer, Springer, vol. 7(1), pages 33-58, March.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gabi Rauscher).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.