IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Democracy, foreign direct investment and natural resources

  • Asiedu, Elizabeth
  • Lien, Donald
Registered author(s):

    Empirical studies that examine the impact of democracy on foreign direct investment (FDI) assume that the relationship between democracy and FDI is the same for resource exporting and non-resource exporting countries. This paper examines whether natural resources in host countries alter this relationship. We estimate a linear dynamic panel-data model using data from 112 developing countries over the period 1982-2007. We find that democracy promotes FDI if and only if the value of the share of minerals and oil in total exports is less than some critical value. We identify 90 countries where an expansion of democracy may enhance FDI and 22 countries where an increase in democratization may reduce FDI. We also find that the effect of democracy on FDI depends on the size and not the type of natural resources.

    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.sciencedirect.com/science/article/pii/S0022-1996(10)00125-X
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Elsevier in its journal Journal of International Economics.

    Volume (Year): 84 (2011)
    Issue (Month): 1 (May)
    Pages: 99-111

    as
    in new window

    Handle: RePEc:eee:inecon:v:84:y:2011:i:1:p:99-111
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505552

    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. Elizabeth Asiedu & Hadi Salehi Esfahani, 2001. "Ownership Structure In Foreign Direct Investment Projects," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 647-662, November.
    2. Adam, Antonis & Filippaios, Fragkiskos, 2007. "Foreign direct investment and civil liberties: A new perspective," European Journal of Political Economy, Elsevier, vol. 23(4), pages 1038-1052, December.
    3. Alesina, Alberto & Dollar, David, 2000. "Who Gives Foreign Aid to Whom and Why?," Journal of Economic Growth, Springer, vol. 5(1), pages 33-63, March.
    4. repec:idb:brikps:6698 is not listed on IDEAS
    5. Philipp Harms & Heinrich Ursprung, 2001. "Do Civil and Political Repression Really Boost Foreign Direct Investments?," CESifo Working Paper Series 421, CESifo Group Munich.
    6. Matteo Bobba & Decio Coviello, 2006. "Weak Instruments and Weak Identification in Estimating the Effects of Education on Democracy," Research Department Publications 4472, .
    7. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
    8. 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.
    9. Bruce A. Blonigen & Miao Wang, 2004. "Inappropriate Pooling of Wealthy and Poor Countries in Empirical FDI Studies," NBER Working Papers 10378, National Bureau of Economic Research, Inc.
    10. 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.
    11. Nabamita Dutta & Sanjukta Roy, 2009. "The Impact of Foreign Direct Investment on Press Freedom," Kyklos, Wiley Blackwell, vol. 62(2), pages 239-257, 04.
    12. North, Douglass C. & Weingast, Barry R., 1989. "Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England," The Journal of Economic History, Cambridge University Press, vol. 49(04), pages 803-832, December.
    13. Matthias Busse, 2004. "Transnational Corporations and Repression of Political Rights and Civil Liberties: An Empirical Analysis," Kyklos, Wiley Blackwell, vol. 57(1), pages 45-65, 02.
    14. Daron Acemoglu & Simon Johnson & James Robinson & Pierre Yared, 2005. "Income and Democracy," NBER Working Papers 11205, National Bureau of Economic Research, Inc.
    15. Kazuhiko Hayakawa, 2005. "Small Sample Bias Propreties of the System GMM Estimator in Dynamic Panel Data Models," Hi-Stat Discussion Paper Series d05-82, Institute of Economic Research, Hitotsubashi University.
    16. Asiedu, Elizabeth, 2002. "On the Determinants of Foreign Direct Investment to Developing Countries: Is Africa Different?," World Development, Elsevier, vol. 30(1), pages 107-119, January.
    17. FOSU, Augustin Kwasi, 2008. "Democracy and growth in Africa: Implications of increasing electoral competitiveness," Economics Letters, Elsevier, vol. 100(3), pages 442-444, September.
    18. Daron Acemoglu & Simon Johnson & James A. Robinson & Pierre Yared, 2005. "From Education to Democracy?," American Economic Review, American Economic Association, vol. 95(2), pages 44-49, May.
    19. Anne D. Boschini & Jan Pettersson & Jesper Roine, 2006. "Resource curse or not: A question of appropriability," DEGIT Conference Papers c011_050, DEGIT, Dynamics, Economic Growth, and International Trade.
    20. Elizabeth Asiedu & Yi Jin & Boaz Nandwa, 2009. "Does Foreign Aid Mitigate the Adverse Effect of Expropriation Risk on Foreign Direct Investment?," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 200905, University of Kansas, Department of Economics.
    21. Elizabeth Asiedu & Donald Lien, 2010. "Democracy, Foreign Direct Investment and Natural Resources," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 201009, University of Kansas, Department of Economics.
    22. Sachs, J-D & Warner, A-M, 1995. "Natural Resource Abundance and Economic Growth," Papers 517a, Harvard - Institute for International Development.
    23. Jo Jakobsen & Indra de Soysa, 2006. "Do Foreign Investors Punish Democracy? Theory and Empirics, 1984-2001," Kyklos, Wiley Blackwell, vol. 59(3), pages 383-410, 08.
    24. Hefeker, Carsten & Busse, Matthias, 2005. "Political Risk, Institutions and Foreign Direct Investment," HWWA Discussion Papers 315, Hamburg Institute of International Economics (HWWA).
    25. Jensen, Nathan M., 2003. "Democratic Governance and Multinational Corporations: Political Regimes and Inflows of Foreign Direct Investment," International Organization, Cambridge University Press, vol. 57(03), pages 587-616, June.
    26. Dutta, Nabamita & Roy, Sanjukta, 2008. "The Role of Foreign Direct Investment on Press Freedom," MPRA Paper 10185, University Library of Munich, Germany, revised 18 Jul 2008.
    27. 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.
    28. Bobba, Matteo & Coviello, Decio, 2007. "Weak instruments and weak identification, in estimating the effects of education, on democracy," Economics Letters, Elsevier, vol. 96(3), pages 301-306, September.
    Full references (including those not matched with items on IDEAS)

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

    When requesting a correction, please mention this item's handle: RePEc:eee:inecon:v:84:y:2011:i:1:p:99-111. 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: (Zhang, Lei)

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.