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Institutional Similarity and Bilateral FDI

Author

Listed:
  • Makram El-Shagi

    (Center for Financial Development and Stability at Henan University, and School of Economics at Henan University, Kaifeng, Henan)

  • Bashir Muhammad

    (Center for Financial Development and Stability at Henan University, and School of Economics at Henan University, Kaifeng, Henan)

Abstract

In this paper we assess the effect of institutional similarity on foreign direct investment. In a large panel of bilateral FDI stocks that covers roughly 190 countries both as host and source country of FDI we demonstrate that it is not similarity in general, but similarity with respect to government involvement in markets and with respect to corruption that matters. Our finding is robust to a large set of different panel estimators and specifications of the gravity model that is underlying our estimation.

Suggested Citation

  • Makram El-Shagi & Bashir Muhammad, 2019. "Institutional Similarity and Bilateral FDI," CFDS Discussion Paper Series 2019/2, Center for Financial Development and Stability at Henan University, Kaifeng, Henan, China.
    • Handle: RePEc:fds:dpaper:201902
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    File URL: http://cfds.henuecon.education/images/dpaper/WP_2_2019_FDI.pdf
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    More about this item

    Keywords

    FDI; institutions; similarity; gravity model;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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