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Governance and foreign direct investment in Latin America: A panel gravity model approach

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  • Turan Subasat
  • Sotirios Bellos

Abstract

It is widely argued that good governance is an important determinant of foreign direct investment (FDI). With the exception of studies of corruption, however, empirical research on the link between governance and FDI is limited, particularly in the context of Latin America. Moreover, recent studies by Bellos and Subasat (2012a and 2012b) suggest that poor governance is a source of attraction rather than a hurdle for multinational companies in selected transition countries. By employing a panel data gravity model, this article aims to verify these unusual and interesting results in the context of selected Latin American countries. Our results confirm that the FDI enhancement role of poor governance exists not only in the transition countries but also in Latin America.

Suggested Citation

  • Turan Subasat & Sotirios Bellos, 2013. "Governance and foreign direct investment in Latin America: A panel gravity model approach," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 50(1), pages 107-131, May.
    • Handle: RePEc:ioe:cuadec:v:50:y:2013:i:1:p:107-131
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    11. Rishma Vedd & Keji Chen & Nataliya Yassinski, 2014. "Country and Industry Factor Influence on Investment in Latin American Emerging Markets," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 8(3), pages 47-57.
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    14. Yeboah, Osei-Agyeman & Shaik, Saleem & Legesse, Bafikadu & Faulkner, Paula & Aku, Helga, "undated". "Bilateral trade flows between U.S TPP countries: Country Pair Analysis," 2017 Annual Meeting, February 4-7, 2017, Mobile, Alabama 252803, Southern Agricultural Economics Association.
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    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • P20 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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