Does corruption inhibit foreign direct investment?

Abstract

Globalization creates new opportunities for firms to invest abroad and many economies are making active efforts to attract Foreign Direct Investment (FDI) in order to promote economic growth. Decisions to invest abroad depend on a complex set of factors, but the least corrupt countries may attract more foreign direct investment because they provide a more favorable climate for investors. In this paper we investigate the impact of corruption on FDI inflows in 73 countries, over the period 1998-2008. Our results suggest that countries where corruption is lower, the FDI inflows are greater, and so controlling corruption may be an important strategy for increase FDI inflows. Keywords: Corruption, Foreign Direct Investment, economic growth. ¿La corrupción inhibe La inversión extranjera Directa?La globalización ha creado nuevas oportunidades para invertir en el extranjero y muchas economías están haciendo esfuerzos para atraer inversión extranjera directa (IED) con el fin de promover el crecimiento económico. La decisión de invertir en el extranjero depende de un complejo conjunto de factores. No obstante, los países menos corruptos pueden atraer más inversión extranjera directa, ya que proporcionan un clima más favorable para los inversionistas. En este trabajo se investiga el impacto de la corrupción sobre los flujos de IED en 73 países, en el período 1998-2008. Los resultados sugieren que los países donde la corrupción es menor, las entradas de IED son mayores, por lo que el control de la corrupción puede ser una estrategia importante para aumentar los flujos de IED. Palabras clave: corrupción, Inversión extranjera directa, crecimiento económico.

Unbiased Technique in Identifying Appropriate Variables for FDI Inflows Model: A Role of Economic Growth in SADC

“…For example, Asiedu (2002) study showed that OPN has a positive impact on FDI inflows in African countries. Another study for 54 African countries by Sichei and Kinyondo (2012) showed similar result (see also Heshmati and Addison, 2003;Asiedu, 2006;Anyanwu, 2011;and Castro and Nunes, 2013). …”

“…For instance, Haksoon (2010) showed that economic growth has a positive impact on FDI inflows of 271 countries. Similarly, Castro and Nunes (2013) suggested the same results of economic growth on FDI inflows for 73 countries (see also Addison and Heshmati, 2003). In Africa, Sichei and Kinyondo (2012) indicated that economic growth exerts a positive effect on FDI inflows in 45 African countries.…”

Relationship between Corruption and FDI Inflow: A Causality Test

“…Quazi (2014), for example has used 1995-2011 panel data and found that the impact of corruption on FDI is significantly negative and robust. Castro and Nunes (2013) have investigated the impact of corruption on FDI inflows in 73 countries, over the period 1998-2008 and found that the least corrupt countries may attract more foreign direct investment because they provide a more favourable climate for investors. Belgibayeva and Plekhanov (2015) have reached a similar result as Castro and Nunes (2013), i.e.…”

Geçi̇ş Ekonomi̇leri̇nde Yolsuzluğun Dyy Üzeri̇ndeki̇ Etki̇si̇: Panel Veri̇ Anali̇zi̇

“…Transparency International (1996) defines corruption as behaviors which are exhibited by politician in public sector and civil servant inappropriately and lawlessly to enrich them and their people by misusing one's power. It is accepted that corruption has potential to decrease investments especially foreign investments (Mauro, 1995;Keefer and Knack, 1996;Castro 2013). Economies with high level of corruption have more uncertainty because of high cost of doing business.…”