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Behave and Be Attractive: The Impact of Governance on FDI Inflows

Hessel, Martin (2005)
Department of Economics
Abstract
This paper examines how governance affects FDI inflows using cross-country analysis for a sample of 156 countries over the period 1996-2004. It looks into six different dimension of governance, measured by indicators constructed by Kaufmann, Kraay and Zoido-Lobatón: (1) Voice and Accountability, (2) Political Stability and Violence, (3) Government Effectiveness, (4) Regulatory Quality, (5) Rule of Law and (6) Corruption. The conclusion is clear: governance matters to FDI and it does so irrespective of which governance dimension one looks at. Countries with good governance attract more FDI than countries with weak governance, given market size, macroeconomic stability, openness to trade and regional idiosyncrasies. This holds for different... (More)
This paper examines how governance affects FDI inflows using cross-country analysis for a sample of 156 countries over the period 1996-2004. It looks into six different dimension of governance, measured by indicators constructed by Kaufmann, Kraay and Zoido-Lobatón: (1) Voice and Accountability, (2) Political Stability and Violence, (3) Government Effectiveness, (4) Regulatory Quality, (5) Rule of Law and (6) Corruption. The conclusion is clear: governance matters to FDI and it does so irrespective of which governance dimension one looks at. Countries with good governance attract more FDI than countries with weak governance, given market size, macroeconomic stability, openness to trade and regional idiosyncrasies. This holds for different samples, over different time periods and is robust to the change of control variables. Furthermore, the return to governance improvements in terms of increased FDI inflows is large. (Less)
Please use this url to cite or link to this publication:
author
Hessel, Martin
supervisor
organization
year
type
H1 - Master's Degree (One Year)
subject
keywords
Foreign direct investment, FDI, institutions, governance, corruption, rule of law, political stability, cross-country analysis, multinational firms, multinational enterprises, transnational corporations, Economics, econometrics, economic theory, economic systems, economic policy, Nationalekonomi, ekonometri, ekonomisk teori, ekonomiska system, ekonomisk politik
language
English
id
1336394
date added to LUP
2005-10-24 00:00:00
date last changed
2010-08-03 10:53:13
@misc{1336394,
  abstract     = {{This paper examines how governance affects FDI inflows using cross-country analysis for a sample of 156 countries over the period 1996-2004. It looks into six different dimension of governance, measured by indicators constructed by Kaufmann, Kraay and Zoido-Lobatón: (1) Voice and Accountability, (2) Political Stability and Violence, (3) Government Effectiveness, (4) Regulatory Quality, (5) Rule of Law and (6) Corruption. The conclusion is clear: governance matters to FDI and it does so irrespective of which governance dimension one looks at. Countries with good governance attract more FDI than countries with weak governance, given market size, macroeconomic stability, openness to trade and regional idiosyncrasies. This holds for different samples, over different time periods and is robust to the change of control variables. Furthermore, the return to governance improvements in terms of increased FDI inflows is large.}},
  author       = {{Hessel, Martin}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Behave and Be Attractive: The Impact of Governance on FDI Inflows}},
  year         = {{2005}},
}