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Foreign Direct Investment, Corruption, and Democracy

Aparna Mathur

American Enterprise Institute (AEI)

Kartikeya Singh

PriceWaterhouseCoopers LLP

November 3, 2011

Applied Economics, Vol. 45, No. 8, 2011

This article is the first to show that foreign investors care about economic freedoms, rather than political freedoms, in making decisions about where to locate capital. Hence more democratic countries may receive less Foreign Direct Investment (FDI) flows if economic freedoms are not guaranteed. One reason could be that democratizing developing economies are often unable to push through the kind of economic reforms that investors desire due to the presence of competing political interests. This could potentially explain why countries like China and Singapore that rank poorly on the democracy index but are relatively high on the property rights index do well in terms of FDI inflows.

Number of Pages in PDF File: 13

Keywords: foreign direct investment, spatial econometrics, emerging economies, panel data, democracy, corruption

JEL Classification: F2, C3, C21, C33, F23

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Date posted: February 8, 2013  

Suggested Citation

Mathur, Aparna and Singh, Kartikeya, Foreign Direct Investment, Corruption, and Democracy (November 3, 2011). Applied Economics, Vol. 45, No. 8, 2011. Available at SSRN: https://ssrn.com/abstract=2212956

Contact Information

Aparna Mathur (Contact Author)
American Enterprise Institute (AEI) ( email )
1150 17th Street, N.W.
Washington, DC 20036
United States
202-868-6026 (Phone)
HOME PAGE: http://www.aei.org/scholar/aparna-mathur/
Kartikeya Singh
PriceWaterhouseCoopers LLP ( email )
1301 Avenue of the Americas
New York, NY 10019
United States
Feedback to SSRN

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