Democracy, Foreign Direct Investment and Natural Resources

39 Pages Posted: 18 Dec 2010

See all articles by Elizabeth Asiedu

Elizabeth Asiedu

University of Kansas - Department of Economics

Donald D. Lien

University of Texas at San Antonio - College of Business - Department of Economics

Date Written: December 16, 2010

Abstract

Existing studies assume that the impact of democracy on FDI is the same for resource exporting and non-resource exporting countries. This paper examines whether natural resources alter the relationship between FDI and democracy. We estimate a linear dynamic panel-data model using data from 112 developing countries over the period 1982-2007, and we find that there is some critical value of the share of minerals and oil in total exports below which democracy enhances FDI, and above which democracy reduces FDI. We identify 90 countries where an expansion of democracy may enhance FDI and 22 countries where an increase in democratization may reduce FDI.

Keywords: Democracy, Foreign Direct Investment, Natural Resources

JEL Classification: F23, D72

Suggested Citation

Asiedu, Elizabeth and Lien, Donald, Democracy, Foreign Direct Investment and Natural Resources (December 16, 2010). Available at SSRN: https://ssrn.com/abstract=1726587 or http://dx.doi.org/10.2139/ssrn.1726587

Elizabeth Asiedu (Contact Author)

University of Kansas - Department of Economics ( email )

1300 Sunnyside Drive
Lawrence, KS 66045-7585
United States
785-864-3501 (Phone)
785-864-5270 (Fax)

Donald Lien

University of Texas at San Antonio - College of Business - Department of Economics ( email )

6900 North Loop 1604 West
San Antonio, TX 78249
United States
210-458-4313 (Phone)
210-458-4308 (Fax)

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