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Membership has its privileges: The effect of membership in international organizations on FDI

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  • Dreher, Axel
  • Mikosch, Heiner
  • Voigt, Stefan

Abstract

We argue that membership in International Organizations (IOs) is an important determinant of FDI inflows. To the extent that membership restricts a country from pursuing policies that are harmful to investors, it can signal low political risk. Using data over the 1971-2005 period, we find that membership in IOs does indeed increase inflows of FDI. Controlling for the endogeneity of membership, we find this effect to be substantively important and robust to the method of estimation. --

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Bibliographic Info

Paper provided by University of Goettingen, Department of Economics in its series Center for European, Governance and Economic Development Research Discussion Papers with number 114.

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Date of creation: 2010
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Handle: RePEc:zbw:cegedp:114

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Keywords: Membership in International Organizations; FDI; Investment Climate; Political Risk; Signaling; Separating Equilibrium;

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  1. 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.
  2. 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.
  3. Andrew K. Rose, 2002. "Do We Really KNow that the WTO Increases Trade?," Working Papers 182002, Hong Kong Institute for Monetary Research.
  4. 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.
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  6. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, Econometric Society, vol. 49(6), pages 1417-26, November.
  7. Ilyana Kuziemko & Eric Werker, 2006. "How Much Is a Seat on the Security Council Worth? Foreign Aid and Bribery at the United Nations," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 114(5), pages 905-930, October.
  8. Carmen M. Reinhart & Kenneth S. Rogoff & Miguel A. Savastano, 2003. "Debt Intolerance," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(1), pages 1-74.
  9. Rose, Andrew K, 2002. "Do WTO Members have More Liberal Trade Policy?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3659, C.E.P.R. Discussion Papers.
  10. Axel Dreher & Jan-Egbert Sturm & James Raymond Vreeland, 2007. "Development Aid and International Politics: Does membership on the UN Security Council influence World Bank decisions?," KOF Working papers 07-171, KOF Swiss Economic Institute, ETH Zurich.
  11. Cho, In-Koo & Kreps, David M, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 102(2), pages 179-221, May.
  12. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, Elsevier, vol. 126(1), pages 25-51, May.
  13. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, December.
  14. Dreher, Axel & Sturm, Jan-Egbert & Vreeland, James Raymond, 2009. "Global horse trading: IMF loans for votes in the United Nations Security Council," European Economic Review, Elsevier, Elsevier, vol. 53(7), pages 742-757, October.
  15. Jennifer Tobin & Susan Rose-Ackerman, 2011. "When BITs have some bite: The political-economic environment for bilateral investment treaties," The Review of International Organizations, Springer, Springer, vol. 6(1), pages 1-32, March.
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