Effects of Corruption on FDI Inflow in Asian Economies

Seoul Journal of Economics, Vol. 25, No. 4, pp. 387-412, 2012

26 Pages Posted: 30 Nov 2012

See all articles by Aye Mengistu Alemu

Aye Mengistu Alemu

SolBridge International School of Business

Date Written: November 30, 2012

Abstract

This study offers fresh insights on and investigates the effects of corruption on foreign direct investment (FDI) inflow from 1995 to 2009 in 16 Asian economies. The empirical result suggests that a 1 percent increase in corruption level triggers an approximately 9.1 percentage point decrease in FDI inflow. Thus, some of the arguments that corruption does not keep FDI out of corrupt countries are either flawed or invalid. The results of this study suggest that some of the countries characterized by a high level of corruption but have remarkable FDI inflows could even double their inward FDIs if they manage to reduce the present pervasive level of corruption.

Keywords: corruption, FDI inflow, panel data, REM, FGLS, economic growth, openness, human capital

JEL Classification: C1, M16, O15, O17, O40, P10

Suggested Citation

Alemu, Aye Mengistu, Effects of Corruption on FDI Inflow in Asian Economies (November 30, 2012). Seoul Journal of Economics, Vol. 25, No. 4, pp. 387-412, 2012, Available at SSRN: https://ssrn.com/abstract=2182405

Aye Mengistu Alemu (Contact Author)

SolBridge International School of Business ( email )

151-13 Samsung 1-dong, Dong-gu
Daejeon, 300-814
Korea, Republic of (South Korea)

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