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Membership has its privileges: The effect of membership in international organizations on FDI

  • Dreher, Axel
  • Mikosch, Heiner
  • Voigt, Stefan

We argue that membership in International Organizations (IOs) is an important determinant of FDI inflows. To the extent that membership restricts a country from pursuing policies that are harmful to investors, it can signal low political risk. Using data over the 1971-2005 period, we find that membership in IOs does indeed increase inflows of FDI. Controlling for the endogeneity of membership, we find this effect to be substantively important and robust to the method of estimation.

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Paper provided by University of Goettingen, Department of Economics in its series Center for European, Governance and Economic Development Research Discussion Papers with number 114.

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Date of creation: 2010
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Handle: RePEc:zbw:cegedp:114
Contact details of provider: Postal: Platz der Göttinger Sieben 3, 37073 Göttingen
Web page: http://www.cege.wiso.uni-goettingen.de/

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  1. Andrew K. Rose, 2002. "Do We Really Know that the WTO Increases Trade?," NBER Working Papers 9273, National Bureau of Economic Research, Inc.
  2. Dreher, Axel & Mikosch, Heiner & Voigt, Stefan, 2010. "Membership has its privileges: The effect of membership in international organizations on FDI," Center for European, Governance and Economic Development Research Discussion Papers 114, University of Goettingen, Department of Economics.
  3. Axel Dreher & Stefan Voigt, 2008. "Does Membership in International Organizations Increase Governments’ Credibility? Testing the Effects of Delegating Powers," KOF Working papers 08-193, KOF Swiss Economic Institute, ETH Zurich.
  4. Putnam, Robert D., 1988. "Diplomacy and domestic politics: the logic of two-level games," International Organization, Cambridge University Press, vol. 42(03), pages 427-460, June.
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  8. Subramanian, Arvind & Wei, Shang-Jin, 2005. "The WTO Promotes Trade, Strongly But Unevenly," CEPR Discussion Papers 5122, C.E.P.R. Discussion Papers.
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  10. David L. Carr & James R. Markusen & Keith E. Maskus, 2001. "Estimating the Knowledge-Capital Model of the Multinational Enterprise," American Economic Review, American Economic Association, vol. 91(3), pages 693-708, June.
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  12. Markusen, James R., 2002. "Multinational Firms and the Theory of International Trade," MPRA Paper 8380, University Library of Munich, Germany.
  13. James R. Markusen, 1997. "Trade versus Investment Liberalization," NBER Working Papers 6231, National Bureau of Economic Research, Inc.
  14. Rose, Andrew K., 2004. "Do WTO members have more liberal trade policy?," Journal of International Economics, Elsevier, vol. 63(2), pages 209-235, July.
  15. World Bank, 2014. "World Development Indicators 2014," World Bank Publications, The World Bank, number 18237.
  16. Axel Dreher & Heiner Mikosch & Stefan Voigt, 2010. "Membership has its Privileges - The Effect of Membership in International Organizations on FDI," CESifo Working Paper Series 3231, CESifo Group Munich.
  17. Voigt, Stefan & Ebeling, Michael & Blume, Lorenz, 2007. "Improving credibility by delegating judicial competence--the case of the Judicial Committee of the Privy Council," Journal of Development Economics, Elsevier, vol. 82(2), pages 348-373, March.
  18. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
  19. Dreher, Axel & Sturm, Jan-Egbert & Vreeland, James Raymond, 2009. "Global horse trading: IMF loans for votes in the United Nations Security Council," European Economic Review, Elsevier, vol. 53(7), pages 742-757, October.
  20. Cho, In-Koo & Kreps, David M, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 179-221, May.
  21. Ashwin Kaja & Eric Werker, 2010. "Corporate Governance at the World Bank and the Dilemma of Global Governance," World Bank Economic Review, World Bank Group, vol. 24(2), pages 171-198, June.
  22. Axel Dreher & Jan-Egbert Sturm & James Raymond Vreeland, 2007. "Development Aid and International Politics: Does membership on the UN Security Council influence World Bank decisions?," KOF Working papers 07-171, KOF Swiss Economic Institute, ETH Zurich.
  23. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  24. Kevin Morrison, 2013. "Membership no longer has its privileges: The declining informal influence of Board members on IDA lending," The Review of International Organizations, Springer, vol. 8(2), pages 291-312, June.
  25. Ilyana Kuziemko & Eric Werker, 2006. "How Much Is a Seat on the Security Council Worth? Foreign Aid and Bribery at the United Nations," Journal of Political Economy, University of Chicago Press, vol. 114(5), pages 905-930, October.
  26. Voigt, Stefan & Salzberger, Eli M, 2002. "Choosing Not to Choose: When Politicians Choose to Delegate Powers," Kyklos, Wiley Blackwell, vol. 55(2), pages 289-310.
  27. Yoram Haftel, 2013. "Commerce and institutions: Trade, scope, and the design of regional economic organizations," The Review of International Organizations, Springer, vol. 8(3), pages 389-414, September.
  28. Erik Voeten, 2014. "Does participation in international organizations increase cooperation?," The Review of International Organizations, Springer, vol. 9(3), pages 285-308, September.
  29. Jennifer Tobin & Susan Rose-Ackerman, 2011. "When BITs have some bite: The political-economic environment for bilateral investment treaties," The Review of International Organizations, Springer, vol. 6(1), pages 1-32, March.
  30. Stephanie Rickard & Daniel Kono, 2014. "Think globally, buy locally: International agreements and government procurement," The Review of International Organizations, Springer, vol. 9(3), pages 333-352, September.
  31. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
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