Foreign direct investment and civil liberties: A new perspective

Adam, Antonis; Filippaios, Fragkiskos

doi:10.1016/j.ejpoleco.2006.08.006

Cited by 73 publications

(65 citation statements)

References 20 publications

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“…In a sample of African countries, Naudé and Krugell (2007) also find that their measure of expropriation risk has no effect on FDI after controlling for host-country income, inflation, and trade openness. Adam and Filippaios (2007) find a negative effect-expropriation risk reduces FDI-but only in countries where civil liberties are sufficiently strong. One possible reason for inconsistent empirical results could be missing controls for the multiple dimensions of institutional quality.…”

Section: Simultaneous Inclusion Of 12 Measures Of Institutional Qualitymentioning

confidence: 93%

“…Ali et al (2010) argue that highly disaggregated indices are more prone to measurement error, while Biswas (2002) and Busse and Hefeker (2007) emphasize multicollinearity (among the 12 ICRG indices) as the greater methodological challenge. Some authors deal with the issue of multicollinearity by focusing only on a selective set of institutional variables (e.g., Adam and Filippaios, 2007;Sánchez-Martin et al, 2014) or by presenting estimates from models that include only one political risk variable at a time (Busse and Hefeker, 2007;Bénassy-Quéré et al, 2007;Daude and Stein, 2007;Gastanaga et al, 1998). However, if other related institutions in the FDIdata-generating process are omitted from the model, then estimates will, in general, suffer from bias.…”

Section: Indices Measuring Institutional Quality and Political Risksmentioning

confidence: 99%

“…Inclusion of this single income variable follows the econometric specifications used by others in the empirical FDI literature (Adam and Filippaios, 2007;Asiedu, 2002;Asiedu and Lien, 2011;Chakrabarti, 2001). The reason for including both income and income growth is to independently control for market size and growth potential.…”

Section: Model Specificationmentioning

confidence: 99%

“…National income normalization is adopted in much of the empirical FDI literature, where the dependent variable is either net or gross FDI expressed as a share of gross domestic product (GDP) or gross national income (GNI) (e.g., Ali et al, 2010;Addison and Heshmati, 2003;Asiedu, 2002Asiedu, , 2006Asiedu et al, 2009;Asiedu and Lien, 2011;Adam and Filippaios, 2007;Gastanaga et al, 1998;Méon and Sekkat, 2004;Naudé and Krugell, 2007;Noorbakhsh et al, 2001;Sánchez-Martin et al, 2014). Other empirical FDI studies, however, normalize by country-year-specific population and use FDI (net or gross) per capita as the dependent variable (e.g., Chakrabarti, 2001;Harms and Ursprung, 2002;Kinoshita and Campos, 2003;Schneider and Frey, 1985).…”

Section: Normalization Of the Dependent Variablementioning

confidence: 99%

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Expropriation risk and FDI in developing countries: Does return of capital dominate return on capital?

Akhtaruzzaman

Berg

Hajzler

2017

European Journal of Political Economy

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. ii Terms of use: Documents in EconStor may AbstractPreviously reported effects of institutional quality and political risks on foreign direct investment (FDI) are mixed and, therefore, difficult to interpret. We present empirical evidence suggesting a relatively clear, statistically robust, and intuitive characterization. Institutional factors that affect the likelihood of an abrupt and total loss of foreigners' capital (i.e., return of capital) dominate those that affect rates of return conditional on a strictly positive terminal investment value (i.e., return on capital). A one-standarddeviation reduction in expropriation risk is associated with a 72 per cent increase in FDI, which is substantially larger than the effects of any other dimensions of institutional quality simultaneously controlled for in our empirical models of FDI inflows. This evidence is consistent with the predictions of a standard theory of FDI under imperfect contract enforcement. We show in the context of a simple model with endogenous expropriation that, when there is a binding threat of expropriation, foreign investors can become unresponsive to differences in other dimensions of institutions and political risk, and may even reduce optimal investment as these institutions improve. Bank topics: Development economics, International financial markets JEL codes: D23, F21, F23 RésuméLes effets signalés antérieurement qu'exercent la qualité des institutions et les risques politiques sur l'investissement direct étranger (IDE) sont contrastés et, par conséquent, difficiles à interpréter. Nous présentons des données empiriques qui font ressortir une caractérisation intuitive statistiquement solide. Les facteurs institutionnels ayant une incidence sur la probabilité d'une perte soudaine et totale du capital détenu par des étrangers (remboursement de capital) l'emportent sur ceux touchant les taux de rendement subordonnés à une valeur nue finale strictement positive (rendement du capital investi). Une réduction de un écart-type du risque d'expropriation est associée à une augmentation de 72 % de l'IDE, une hausse nettement supérieure à celles engendrées par n'importe quels autres aspects de la qualité des institutions pris en compte simultanément dans nos modèles empiriques d'entrées d'IDE. Ce résultat cadre avec les prédictions d'une théorie classique de l'IDE où l'exécution des contrats est imparfaite. Dans un modèle simple intégrant un facteur d'expropriation endogène, nous démontrons qu...

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Section: Simultaneous Inclusion Of 12 Measures Of Institutional Qualitymentioning

confidence: 93%

Section: Indices Measuring Institutional Quality and Political Risksmentioning

confidence: 99%

Section: Model Specificationmentioning

confidence: 99%

Section: Normalization Of the Dependent Variablementioning

confidence: 99%

See 2 more Smart Citations

Expropriation risk and FDI in developing countries: Does return of capital dominate return on capital?

Akhtaruzzaman

Berg

Hajzler

2017

European Journal of Political Economy

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“…For example Harms and Ursprung (2002), Adam and Filippaios (2007) and others, examine the e ect of democracy on the ow of Foreign Direct Investments. The general nding is that democracy increases FDI as long as FDI are not targeted towards the extraction of natural resources (Asiedu and Lien, 2011).…”

Section: Introductionmentioning

confidence: 99%

Do democracies have higher current account deficits?

Adam

Tsarsitalidou

2017

Const Polit Econ

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In this paper we argue that democracies tend to run (larger)current account de cits than autocracies. Our argument is based on the di erent incentives faced by democratic and autocratic leaders. The main theoretical hypothesis are tested on a dataset that consists of 121 countries over the period 1980-2012, using ve year averages and a xed e ects panel data model. The empirical ndings suggest that autocracies run lower current account de cits than democracies. Special focus is given in the issue of endogeneity by estimating an IV Fixed E ects model, using as instruments of Democracy the share of Christian adherents in each country and also the level of democracy in neighboring countries. These results are found to be robust across alternative empirical speci cations. Keywords:Current Account, Democracy, Autocracy

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Does environmental sustainability attract foreign investment? Evidence from developing countries

2022

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This study contributes to the literature by investigating the effect of environmental degradation on foreign direct investment (FDI) using comprehensive panel data from 103 developing countries between 1970 and 2019. In this study, nine variables, namely, CO2 emissions, total greenhouse gas emissions, methane emissions, PM2.5, nitrous oxide emissions, ecological footprint of consumption, ecological footprint of production, total area (ecological footprint), and total biocapacity, were used to measure environmental degradation/sustainability. Using Lewbel's two‐stage least squares to control endogeneity issues, the result from the aggregated sample indicates that while CO2 emissions significantly reduce FDI, the remaining environmental degradation variables stimulate FDI. Further analysis reveals that, generally, environmental degradation boosts FDI flows to low and lower‐middle income countries while reducing FDI flows to upper‐middle income countries. The regional analysis also shows that environmental degradation generally reduces FDI flows to Europe and Central Asia, and the Middle East and North Africa regions while stimulating FDI flows to South Asia, Sub‐Saharan Africa, Latin America, and the Caribbean. Environmental degradation was found to have a neutral effect on FDI flows to East Asia and the Pacific. These results are robust to alternative econometric techniques. The policy implications are discussed.

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Foreign direct investment and civil liberties: A new perspective

Cited by 73 publications

References 20 publications

Expropriation risk and FDI in developing countries: Does return of capital dominate return on capital?

Expropriation risk and FDI in developing countries: Does return of capital dominate return on capital?

Do democracies have higher current account deficits?

Does environmental sustainability attract foreign investment? Evidence from developing countries

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