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The Effects of Greenfield FDI and Cross-Border M&As on Government Size

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  • Ashraf, Ayesha

Abstract

This study examines the effects of greenfield FDI and cross-border mergers and acquisitions (M&As) on government size in host countries of FDI. Using panel data for up to 135 countries for the period from 2003-2012, the study specifically tests the compensation hypothesis, suggesting that by increasing economic insecurity, economic openness leads to larger government size. It is found that greenfield FDI increases labour market volatility and thereby economic insecurity while M&As are not significantly associated with labour market volatility. The main results of this study are that greenfield FDI has a robust positive effect on government size, while M&As have no statistically significant effect on government size in the total sample of developed and developing countries, as well as in the sub-samples of developed and developing countries.

Suggested Citation

  • Ashraf, Ayesha, 2015. "The Effects of Greenfield FDI and Cross-Border M&As on Government Size," MPRA Paper 65061, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:65061
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    1. Wang, Fan & Ning, Lutao & Zhang, Jie, 2017. "FDI pace, rhythm and host region technological upgrading: Intra- and interregional evidence from Chinese cities," China Economic Review, Elsevier, vol. 46(S), pages 65-76.

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    More about this item

    Keywords

    greenfield FDI; cross-border M&As; government size;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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