Democracy and FDI

Arbeitspapier

Many believe that multinational enterprises insensitively ignore political rights and civil liberties in the countries of their investments. Frequently, non-governmental organisations accuse multinationals of fostering repressive regimes in developing countries and consider foreign direct investment (FDI) as a tool of exploitation. This paper tries to examine empirically the complex relationship between democracy and FDI in a systematic way, using cross-sectional and panel data analysis. The results indicate that – on average – investments by multinationals are significantly higher in democratic countries, thereby refuting the hypothesis that political repression fosters FDI. Yet this positive link does not hold for the 1970s, when a considerable share of FDI flowed to countries with repressive regimes.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: HWWA Discussion Paper ; No. 220

Classification and Topics

• Classification: Wirtschaft ; International Investment; Long-term Capital Movements ; Multinational Firms; International Business ; Multiple or Simultaneous Equation Models: Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models ; Multiple or Simultaneous Equation Models: Panel Data Models; Spatio-temporal Models
• Subject: FDI ; Democracy ; Political Rights ; Civil Liberties ; Direktinvestition ; Multinationales Unternehmen ; Demokratie ; Menschenrechte ; Schätzung ; Welt

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Busse, Matthias
• Event: Veröffentlichung
• (who): Hamburg Institute of International Economics (HWWA)
• (where): Hamburg
• (when): 2003

Further information

• Handle: http://hdl.handle.net/10419/19312
• Last update: 10.03.2025, 11:43 AM CET