Political regime, private investment, and foreign direct investment in developing countries

Arbeitspapier

This paper uses annual aggregate data for 36 low or middle income countries covering the period 1995-2001 to investigate the effect of FDI on private investment. It also explores if the relationship between FDI and private investment is influenced by the nature of the political regime, using four governance measures (voice and accountability, regulatory quality, political stability, and control of corruption) to distinguish between market-friendly (high or good governance values) and market-unfriendly (low governance) regimes. The results, which hold for all of the governance measures, show that private investment is more important than FDI in terms of the contribution to total investment, and that FDI inflows and private investment are higher in countries with good governance. Interestingly, the findings demonstrate that FDI tends to displace domestic private investment, and this crowding out effect is greater in countries with good governance.

Object Details

• ISBN: 978-92-9230-167-5
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: WIDER Research Paper ; No. 2008/109

Classification and Topics

• Classification: Wirtschaft ; Investment; Capital; Intangible Capital; Capacity ; Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
• Subject: FDI ; investment sources ; finance ; Direktinvestition ; Investition ; Politisches System ; Entwicklungsländer

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Udomkerdmongkol, Manop ; Morrissey, Oliver
• Event: Veröffentlichung
• (who): The United Nations University World Institute for Development Economics Research (UNU-WIDER)
• (where): Helsinki
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/45105
• Last update: 10.03.2025, 11:44 AM CET