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The effect of corruption on FDI: A parametric and non-parametric analysis

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  • Barassi, Marco R.
  • Zhou, Ying

Abstract

This paper analyses the effect of corruption on Multinational Enterprises' (MNEs) incentives to undertake FDI in a particular country. We contribute to the existing literature by modelling the relationship between corruption and FDI using both parametric and non-parametric methods. We report that the impact of corruption on FDI stock is different for the different quantiles of the FDI stock distribution. This is a characteristic that could not be captured in previous studies which used only parametric methods. After controlling for the location selection process of MNEs and other host country characteristics, the result from both parametric and non-parametric analyses offer some support for the ‘helping-hand’ role of corruption.

Suggested Citation

  • Barassi, Marco R. & Zhou, Ying, 2012. "The effect of corruption on FDI: A parametric and non-parametric analysis," European Journal of Political Economy, Elsevier, vol. 28(3), pages 302-312.
  • Handle: RePEc:eee:poleco:v:28:y:2012:i:3:p:302-312
    DOI: 10.1016/j.ejpoleco.2012.01.001
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    References listed on IDEAS

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    More about this item

    Keywords

    Corruption; FDI; Parametric; Non parametric; MNEs' location choice;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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