Advanced Search
MyIDEAS: Login

Political Regime, Private Investment, and Foreign Direct Investment in Developing Countries

Contents:

Author Info

  • Udomkerdmongkol, Manop
  • Morrissey, Oliver
Registered author(s):

    Abstract

    This paper uses annual aggregate data for 36 low or middle income countries covering the period 1995-2001 to investigate the effect of FDI on private investment. It also explores if the relationship between FDI and private investment is influenced by the nature of the political regime, using four governance measures (voice and accountability, regulatory quality, political stability, and control of corruption) to distinguish between ?market-friendly? (high or good governance values) and ?market-unfriendly? (low governance) regimes. The results, which hold for all of the governance measures, show that private investment is more important than FDI in terms of the contribution to total investment, and that FDI inflows and private investment are higher in countries with good governance. Interestingly, the findings demonstrate that FDI tends to displace domestic private investment, and this ?crowding out? effect is greater in countries with good governance.

    Download Info

    If 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.
    File URL: http://www.wider.unu.edu/stc/repec/pdfs/rp2008/rp2008-109.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Paper Series with number UNU-WIDER Research Paper RP2008/109.

    as in new window
    Length: 22 pages
    Date of creation: 2008
    Date of revision:
    Handle: RePEc:unu:wpaper:rp2008-109

    Contact details of provider:
    Postal: Katajanokanlaituri 6B, 00160 Helsinki
    Phone: +358-9-6159911
    Fax: +358-9-61599333
    Email:
    Web page: http://www.wider.unu.edu/
    More information through EDIRC

    Related research

    Keywords: FDI; investment sources; finance;

    References

    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.:
    as in new window
    1. Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998. "How does foreign direct investment affect economic growth?1," Journal of International Economics, Elsevier, vol. 45(1), pages 115-135, June.
    2. Almeida, Rita K. & Fernandes, Ana Margarida, 2007. "Openness and Technological Innovations in Developing Countries: Evidence from Firm-Level Surveys," IZA Discussion Papers 2907, Institute for the Study of Labor (IZA).
    3. Kai Carstensen & Farid Toubal, 2003. "Foreign Direct Investment in Central and Eastern European Countries: A Dynamic Panel Analysis," Kiel Working Papers 1143, Kiel Institute for the World Economy.
    4. Gyimah-Brempong, Kwabena & Traynor, Thomas L, 1999. "Political Instability, Investment and Economic Growth in Sub-Saharan Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 8(1), pages 52-86, March.
    5. Peter Nunnenkamp, 2002. "To What Extent Can Foreign Direct Investment Help Achieve International Development Goals?," Kiel Working Papers 1128, Kiel Institute for the World Economy.
    6. Bruce A. Blonigen, 2005. "A Review of the Empirical Literature on FDI Determinants," NBER Working Papers 11299, National Bureau of Economic Research, Inc.
    7. Manuel R. AGOSIN & Ricardo MAYER, 2000. "Foreign Investment In Developing Countries, Does It Crowd In Domestic Investment?," UNCTAD Discussion Papers 146, United Nations Conference on Trade and Development.
    8. Oshikoya, Temitope W, 1994. "Macroeconomic Determinants of Domestic Private Investment in Africa: An Empirical Analysis," Economic Development and Cultural Change, University of Chicago Press, vol. 42(3), pages 573-96, April.
    9. Nigel Driffield & Dylan Hughes, 2003. "Foreign and Domestic Investment: Regional Development or Crowding Out?," Regional Studies, Taylor & Francis Journals, vol. 37(3), pages 277-288.
    10. Li, Quan & Resnick, Adam, 2003. "Reversal of Fortunes: Democratic Institutions and Foreign Direct Investment Inflows to Developing Countries," International Organization, Cambridge University Press, vol. 57(01), pages 175-211, December.
    11. Dalmazzo, Alberto & Marini, Giancarlo, 2000. "Foreign Debt, Sanctions and Investment: A Model with Politically Unstable Less Developed Countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 5(2), pages 141-53, April.
    12. Jan Mišun & Vladimr Tomšk, 2002. "Does Foreign Direct Investment Crowd in or Crowd out Domestic Investment?," Eastern European Economics, M.E. Sharpe, Inc., vol. 40(2), pages 38-56, March.
    13. Edgardo Campos, J. & Lien, Donald & Pradhan, Sanjay, 1999. "The Impact of Corruption on Investment: Predictability Matters," World Development, Elsevier, vol. 27(6), pages 1059-1067, June.
    14. Carmen Reinhart & Kenneth Rogoff, 2003. "FDI to Africa: The Role of Price Stability and Currency Instability," IMF Working Papers 03/10, International Monetary Fund.
    15. Sourafel Girma & Yundan Gong, 2008. "FDI, Linkages and the Efficiency of State-Owned Enterprises in China," Journal of Development Studies, Taylor & Francis Journals, vol. 44(5), pages 728-749.
    16. Dawson, John W, 1998. "Institutions, Investment, and Growth: New Cross-Country and Panel Data Evidence," Economic Inquiry, Western Economic Association International, vol. 36(4), pages 603-19, October.
    17. Cardoso, Eliana, 1993. "Private Investment in Latin America," Economic Development and Cultural Change, University of Chicago Press, vol. 41(4), pages 833-48, July.
    18. Cohen Daniel, 1990. "Slow growth and large ldc debt in the eighties : an empirical analysis," CEPREMAP Working Papers (Couverture Orange) 9002, CEPREMAP.
    19. Gastanaga, Victor M. & Nugent, Jeffrey B. & Pashamova, Bistra, 1998. "Host Country Reforms and FDI Inflows: How Much Difference do they Make?," World Development, Elsevier, vol. 26(7), pages 1299-1314, July.
    20. David Deok-Ki Kim & Jung-Soo Seo, 2003. "Does FDI inflow crowd out domestic investment in Korea?," Journal of Economic Studies, Emerald Group Publishing, vol. 30(6), pages 605-622, October.
    21. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:unu:wpaper:rp2008-109. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bruck Tadesse).

    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.