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External commitment mechanisms, institutions, and FDI in GCC countries

  • Mina, Wasseem

The purpose of this paper is to empirically examine the influence of bilateral investment treaties and domestic institutions on foreign direct investment (FDI) in the GCC countries. Using panel data for the period 1984-2002 and instrumental variables estimation methodology, the paper finds that bilateral investment treaties (BITs) contracted with OECD and upper middle-income countries have a surprisingly negative influence and seem to be prevailed by the significantly positive influence of domestic institutions on FDI. BITs contracted with high-income non-OECD countries have a positive influence and prevail domestic institutions. The results have important institutional reform implications for GCC economic diversification efforts.

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File URL: http://www.sciencedirect.com/science/article/B6VGT-4RV7YDY-1/2/dd140dad6fcf3fabcce777b45e6fa5e1
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Article provided by Elsevier in its journal Journal of International Financial Markets, Institutions and Money.

Volume (Year): 19 (2009)
Issue (Month): 2 (April)
Pages: 371-386

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Handle: RePEc:eee:intfin:v:19:y:2009:i:2:p:371-386
Contact details of provider: Web page: http://www.elsevier.com/locate/intfin

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  1. Neumayer, Eric & Spess, Laura, 2005. "Do bilateral investment treaties increase foreign direct investment to developing countries?," World Development, Elsevier, vol. 33(10), pages 1567-1585, October.
  2. Anil Mishra & Kevin Daly, 2007. "Effect of quality of institutions on outward foreign direct investment," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 16(2), pages 231-244.
  3. Ginsburg, Tom, 2005. "International Substitutes for Domestic Institutions: Bilateral Investment Treaties and Governance," International Review of Law and Economics, Elsevier, vol. 25(1), pages 107-123, March.
  4. Mina, Wasseem, 2007. "The location determinants of FDI in the GCC countries," Journal of Multinational Financial Management, Elsevier, vol. 17(4), pages 336-348, October.
  5. Egger, Peter & Pfaffermayr, Michael, 2004. "The impact of bilateral investment treaties on foreign direct investment," Journal of Comparative Economics, Elsevier, vol. 32(4), pages 788-804, December.
  6. Shang-Jin Wei, 1997. "How Taxing is Corruption on International Investors?," William Davidson Institute Working Papers Series 63, William Davidson Institute at the University of Michigan.
  7. Wasseem, Mina, 2007. "Are the GCC FDI Location Determinants Favorable?," Economics Discussion Papers 2007-23, Kiel Institute for the World Economy.
  8. Christian Daude & Ernesto Stein, 2007. "The Quality Of Institutions And Foreign Direct Investment," Economics and Politics, Wiley Blackwell, vol. 19(3), pages 317-344, November.
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