Democracy, Foreign Direct Investment and Natural Resources
39 Pages Posted: 18 Dec 2010
Date Written: December 16, 2010
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: Suggested Citation