The Effects of Corruption on FDI Inflows
Ali Al Sadig
Saudi Arabian Monetary Agency
June 14, 2009
Cato Journal, Vol. 29, No. 2, 2009
This article intends to answer the following question: Does a corrupt host country receive less or more FDI inflows after controlling for other determinants of FDI location?
Our results show that the corruption level in the host country has an adverse effect on FDI inflows: a one-point increase in the corruption level leads to a reduction in per capita FDI inflows by about 11 percent. However, after controlling for other characteristics of the host country such as the quality of institutions, the negative effects of corruption disappear and sometimes it becomes positive but statistically insignificant.
Number of Pages in PDF File: 28
Keywords: foreign direct investment flows, how does corruption impact foreign investment, multinational corporations
JEL Classification: E22, F21, O16, D73
Date posted: May 15, 2013