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Foreign Direct Investment and Civil Rights: Testing Decreasing Returns to Civil Rights

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  • Ponce, Aldo

Abstract

In this paper, I examine the effectiveness of improvements in political and civil rights for attracting foreign direct investment flows (FDI) into democracies. I contend that advances in the quality of democracy – specifically those concerning civil rights – present positive but decreasing marginal returns in attracting FDI inflows. I empirically prove this proposition by using panel data regressions within the Latin American and Eastern European contexts from periods following their democratization (1991-2003).

Suggested Citation

  • Ponce, Aldo, 2010. "Foreign Direct Investment and Civil Rights: Testing Decreasing Returns to Civil Rights," MPRA Paper 22020, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:22020
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    File URL: https://mpra.ub.uni-muenchen.de/22020/1/MPRA_paper_22020.pdf
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    References listed on IDEAS

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    1. Bengoa, Marta & Sanchez-Robles, Blanca, 2003. "Foreign direct investment, economic freedom and growth: new evidence from Latin America," European Journal of Political Economy, Elsevier, vol. 19(3), pages 529-545, September.
    2. Campos, Nauro F & Kinoshita, Yuko, 2008. "Foreign Direct Investment and Structural Reforms: Evidence from Eastern Europe and Latin America," IZA Discussion Papers 3332, Institute for the Study of Labor (IZA).
    3. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1991. "The Allocation of Talent: Implications for Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 503-530.
    4. Noorbakhsh, Farhad & Paloni, Alberto & Youssef, Ali, 2001. "Human Capital and FDI Inflows to Developing Countries: New Empirical Evidence," World Development, Elsevier, vol. 29(9), pages 1593-1610, September.
    5. Dani Rodrik, 1996. "Understanding Economic Policy Reform," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 9-41, March.
    6. repec:cup:apsrev:v:72:y:1978:i:04:p:1243-1261_15 is not listed on IDEAS
    7. Schneider, Friedrich & Frey, Bruno S., 1985. "Economic and political determinants of foreign direct investment," World Development, Elsevier, vol. 13(2), pages 161-175, February.
    8. Maddala, G S & Wu, Shaowen, 1999. " A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 631-652, Special I.
    9. S. Illeris & G. Akehurst, 2001. "Introduction," The Service Industries Journal, Taylor & Francis Journals, vol. 21(1), pages 1-4, January.
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    11. Bevan, Alan & Estrin, Saul, 2000. "The Determinants of Foreign Direct Investment in Transition Economies," CEPR Discussion Papers 2638, C.E.P.R. Discussion Papers.
    12. Alan A. Bevan & Saul Estrin, 2000. "The Determinants of Foreign Direct Investment in Transition Economies," William Davidson Institute Working Papers Series 342, William Davidson Institute at the University of Michigan.
    13. 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.
    14. 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.
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    More about this item

    Keywords

    foreign direct investment; civil rights; democratization; developing nations; Latin America; Eastern Europe;

    JEL classification:

    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • K00 - Law and Economics - - General - - - General (including Data Sources and Description)
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • P52 - Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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