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Governance and foreign direct investment: a panel gravity model approach


  • Sotirios Bellos
  • Turan Subasat


This paper investigates the link between governance and foreign direct investment in the case of 14 transition countries by using a panel gravity model approach in two alternative ways. First, the level of governance in the target country is studied. Second, the absolute difference in the governance level between the source and target country is investigated. In both cases the results suggest that the lack of good governance does not deter, in fact it encourages, foreign direct investment.

Suggested Citation

  • Sotirios Bellos & Turan Subasat, 2012. "Governance and foreign direct investment: a panel gravity model approach," International Review of Applied Economics, Taylor & Francis Journals, vol. 26(3), pages 303-328, April.
  • Handle: RePEc:taf:irapec:v:26:y:2012:i:3:p:303-328
    DOI: 10.1080/02692171.2011.587110

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    References listed on IDEAS

    1. Engelbert Stockhammer & Eckhard Hein & Lucas Grafl, 2011. "Globalization and the effects of changes in functional income distribution on aggregate demand in Germany," International Review of Applied Economics, Taylor & Francis Journals, vol. 25(1), pages 1-23.
    2. Taylor, Lance, 1985. "A Stagnationist Model of Economic Growth," Cambridge Journal of Economics, Oxford University Press, vol. 9(4), pages 383-403, December.
    3. Arestis, Philip & McCauley, Kevin & Sawyer, Malcolm, 2001. "An Alternative Stability Pact for the European Union," Cambridge Journal of Economics, Oxford University Press, vol. 25(1), pages 113-130, January.
    4. Engelbert Stockhammer & Özlem Onaran & Stefan Ederer, 2009. "Functional income distribution and aggregate demand in the Euro area," Cambridge Journal of Economics, Oxford University Press, vol. 33(1), pages 139-159, January.
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    Cited by:

    1. Irfan Ahmad Khan & Mazhar Mughal & Junaid Ahmed & Hongbo Cai, 2017. "Home and Host country determinants of financial investment flows to Pakistan," Economics Bulletin, AccessEcon, vol. 37(1), pages 361-376.
    2. Di Guardo, Maria Chiara & Marrocu, Emanuela & Paci, Raffaele, 2016. "The effect of local corruption on ownership strategy in cross-border mergers and acquisitions," Journal of Business Research, Elsevier, vol. 69(10), pages 4225-4241.
    3. Dasgupta, Shouro & De Cian, Enrica, 2016. "Institutions and the Environment: Existing Evidence and Future Directions," MITP: Mitigation, Innovation,and Transformation Pathways 240747, Fondazione Eni Enrico Mattei (FEEM).
    4. Gani, Azmat & Clemes, Michael D., 2013. "Modeling the effect of the domestic business environment on services trade," Economic Modelling, Elsevier, vol. 35(C), pages 297-304.
    5. repec:eur:ejmsjr:202 is not listed on IDEAS
    6. Biró, Flóra Panna & Márkus, Ádám & Erdey, László, 2016. "A kormányzás hatása a közvetlen külföldi tőkebefektetésekre Latin-Amerikában," MPRA Paper 80025, University Library of Munich, Germany.
    7. Adiya Belgibayeva & Alexander Plekhanov, 2016. "Does Corruption Matter for Sources of Foreign Direct Investment?," Birkbeck Working Papers in Economics and Finance 1604, Birkbeck, Department of Economics, Mathematics & Statistics.
    8. 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.
    9. repec:agr:journl:v:xxiv:y:2017:i:2(611):p:277-290 is not listed on IDEAS
    10. Turan Subasat & Sotiris Bellos, 2011. "Economic Freedom and Foreign Direct Investment in Latin America: A Panel Gravity Model Approach," Economics Bulletin, AccessEcon, vol. 31(3), pages 2053-2065.

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