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Political Risk, Institutions and Foreign Direct InvestmentMatthias BusseRuhr-University Bochum; HWWI - Hamburg Institute of International Economics Carsten HefekerHWWA Institute of International Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research) April 2005 HWWA Discussion Paper No. 315 Abstract: The paper explores the linkages between political risk, institutions and foreign direct investment inflows. Using different econometric techniques for a data sample of 83 developing countries and the period 1984 to 2003, we identify those indicators that matter most for the activities of multinational corporations. Overall, 12 different indicators for political risk and institutions are employed in the empirical analysis. The results show that government stability, the absence of internal conflict and ethnic tensions, basic democratic rights and ensuring law and order are highly significant determinants of foreign investment inflows.
Number of Pages in PDF File: 28 Keywords: Political risk, institutions, FDI, multinational corporations JEL Classification: C31, C33, F21, F23 working papers seriesDate posted: April 21, 2005Suggested CitationContact Information
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