Democracy, foreign direct investment and natural resources
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.
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.
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.:
- 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.
- 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.
- Boschini, Anne & Pettersson, Jan & Roine, Jesper, 2003.
"Resource curse or not: A question of appropriability,"
SSE/EFI Working Paper Series in Economics and Finance
534, Stockholm School of Economics.
- Anne D. Boschini & Jan Pettersson & Jesper Roine, 2007. "Resource Curse or Not: A Question of Appropriability," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(3), pages 593-617, 09.
- 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.
- 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.
- Bruce A. Blonigen & Miao Wang, 2004. "Inappropriate Pooling of Wealthy and Poor Countries in Empirical FDI Studies," Working Papers and Research 0903, Marquette University, Center for Global and Economic Studies and Department of Economics.
- Hayakawa, Kazuhiko, 2007.
"Small sample bias properties of the system GMM estimator in dynamic panel data models,"
Elsevier, vol. 95(1), pages 32-38, April.
- 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.
- 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.
- Acemoglu, Daron & Johnson, Simon & Robinson, James A & Yared, Pierre, 2005.
"Income and Democracy,"
CEPR Discussion Papers
5273, C.E.P.R. Discussion Papers.
- Hefeker, Carsten & Busse, Matthias, 2005.
"Political Risk, Institutions and Foreign Direct Investment,"
HWWA Discussion Papers
315, Hamburg Institute of International Economics (HWWA).
- Busse, Matthias & Hefeker, Carsten, 2007. "Political risk, institutions and foreign direct investment," European Journal of Political Economy, Elsevier, vol. 23(2), pages 397-415, June.
- 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.
- Alberto Alesina & David Dollar, 1998.
"Who Gives Foreign Aid to Whom and Why?,"
NBER Working Papers
6612, National Bureau of Economic Research, Inc.
- Arellano, Manuel & Bond, Stephen, 1991.
"Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,"
Review of Economic Studies,
Wiley Blackwell, vol. 58(2), pages 277-97, April.
- Tom Doan, . "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- Philipp Harms & Heinrich Ursprung, 2001.
"Do Civil and Political Repression Really Boost Foreign Direct Investments?,"
CESifo Working Paper Series
421, CESifo Group Munich.
- Philipp Harms & Heinrich W. Ursprung, 2002. "Do Civil and Political Repression Really Boost Foreign Direct Investments?," Economic Inquiry, Western Economic Association International, vol. 40(4), pages 651-663, October.
- FOSU, Augustin Kwasi, 2008. "Democracy and growth in Africa: Implications of increasing electoral competitiveness," Economics Letters, Elsevier, vol. 100(3), pages 442-444, September.
- 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.
- Asiedu, Elizabeth & Jin, Yi & Nandwa, Boaz, 2009. "Does foreign aid mitigate the adverse effect of expropriation risk on foreign direct investment?," Journal of International Economics, Elsevier, vol. 78(2), pages 268-275, July.
- 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.
- Daron Acemoglu & Simon Johnson & James A. Robinson & Pierre Yared, 2005.
"From Education to Democracy?,"
NBER Working Papers
11204, National Bureau of Economic Research, Inc.
- 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.
- 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.
- Bobba, Matteo & Coviello, Decio, 2007.
"Weak instruments and weak identification, in estimating the effects of education, on democracy,"
Elsevier, vol. 96(3), pages 301-306, September.
- Decio Coviello & Matteo Bobba, 2006. "Weak instruments and weak identification in estimating the effects of education on democracy," IDB Publications (Working Papers) 6698, Inter-American Development Bank.
- Matteo Bobba & Decio Coviello, 2006. "Weak Instruments and Weak Identification in Estimating the Effects of Education on Democracy," Research Department Publications 4472, Inter-American Development Bank, Research Department.
- 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.
- Blundell, Richard & Bond, Stephen, 1998.
"Initial conditions and moment restrictions in dynamic panel data models,"
Journal of Econometrics,
Elsevier, vol. 87(1), pages 115-143, August.
- 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.
- Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
- R Blundell & Steven Bond, . "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
- Sachs, J-D & Warner, A-M, 1995.
"Natural Resource Abundance and Economic Growth,"
517a, Harvard - Institute for International Development.
- 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.
- 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.
- 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.
- Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
- Nabamita Dutta & Sanjukta Roy, 2009. "The Impact of Foreign Direct Investment on Press Freedom," Kyklos, Wiley Blackwell, vol. 62(2), pages 239-257, 04.
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.