Asymmetric Effects of Corruption on FDI: Evidence from Swedish Multinational Firms

IUI Working Paper No. 641

47 Pages Posted: 19 Jul 2005

See all articles by Helena Svaleryd

Helena Svaleryd

Uppsala University

Katariina Hakkala

Research Institute of Industrial Economics (IFN)

Pehr-Johan Norbäck

Research Institute of Industrial Economics (IFN)

Multiple version iconThere are 2 versions of this paper

Date Written: May 2005

Abstract

We examine the effect of corruption on foreign direct investments. Our model shows that corruption may have different effects on investments aimed at selling to a local market, in comparison to investments aimed at selling from the corrupt market. Using Swedish firm-level data, we find that affiliate local sales decrease with corruption, while affiliate exports increase. Finally, corruption has a negative effect on the probability that a foreign firm will invest in a country. These results are consistent with theory when bribing reduces production costs and local firms have an advantage in bribing vis a vis foreign firms.

Keywords: FDI, corruption, multinational firm

JEL Classification: D73, F21, F23

Suggested Citation

Svaleryd, Helena and Hakkala, Katariina and Norbäck, Pehr-Johan, Asymmetric Effects of Corruption on FDI: Evidence from Swedish Multinational Firms (May 2005). IUI Working Paper No. 641, Available at SSRN: https://ssrn.com/abstract=735364 or http://dx.doi.org/10.2139/ssrn.735364

Helena Svaleryd (Contact Author)

Uppsala University ( email )

P.O. Box 513
Uppsala, 75120
Sweden

Katariina Hakkala

Research Institute of Industrial Economics (IFN) ( email )

Grevgatan 34, 2nd floor
S-114 85 Stockholm, SE-102 15
Sweden

Pehr-Johan Norbäck

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

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