Political Risk, Institutions and Foreign Direct Investment
Ruhr-University Bochum; HWWI - Hamburg Institute of International Economics
HWWA Institute of International Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
HWWA Discussion Paper No. 315
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, F23working papers series
Date posted: April 21, 2005
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