Does corruption hinder investment? Evidence from Russian regions

This paper investigates the relationship between corruption and fixed capital investment in the setting of a corrupt country. Using different measures of corruption – registered cases of bribe taking and incidents of experienced corruption by the population – we find a negative relationship between investment and corruption. We then address the problem of endogeneity of corruption using an instrumental variables approach: when corruption is instrumented with freedom of the press and violations of journalists' rights, we find an even bigger negative effect. Disaggregating investment by ownership-type shows that only private investment is affected by corruption, but not investment made by state-owned companies. The negative effect is larger for companies with full or partial foreign ownership. Additionally, we look at the relationship between corruption and foreign direct investment (FDI): similar to the investment in fixed capital, we find a negative relationship; however, its statistical significance varies across specifications with different data sources for FDI and different corruption measures.     

The impact of corruption on FDI: is MENA an exception?

The eruption of the Arab Spring in Tunisia and Egypt was ensued by deterioration in FDI inflows. Whether a new Middle East free of corruption accompanying previous dictatorships will offset the negative ramifications of the uprisings and enhance FDI in the long run remains debatable. Since the evidence on the causal relationship between corruption and FDI is inconclusive, this study attempts to take another step. The paper investigates the link between corruption and FDI flows to the Middle East and North Africa (MENA) and assesses whether or not corruption has more importance than other FDI determinants. By employing several panel settings with various econometric specifications on 21 MENA countries over the period 2003 to 2009, it is demonstrated that FDI varies positively with corruption. Additionally, FDI in MENA was found to vary positively with per capita income, openness, freedom and security of investments and negatively with the tax and homicide rates. Since corruption was not found to hinder FDI inflows, treating corruption should be based on sound legal procedures that infringe neither on the rights, freedom and security of FDI nor on the degree of openness and freedom of the economy, which are the real stimulants of FDI in MENA.     

National levels of corruption and foreign direct investment

We model the relationship between bilateral foreign direct investment (FDI) and the level of corruption in multinational firms’ (MCNs’) home and host countries. We construct and test a model of bilateral FDI between countries that differ in their levels of corruption. FDI is affected negatively both by the level of corruption in the host country and by differences in home- and host-country corruption. Our model emphasizes that MNCs develop skills for dealing with home-country corruption, and these skills become a competitive advantage in similarly corrupt host countries. We test the model using data on bilateral FDI stocks among a large number of home and host countries, using a variety of specifications and estimation strategies to provide robustness. Our results show that the effects of host-country corruption and of differences in corruption levels between home and host countries are statistically and economically significant.     

CORRUPTION AND FOREIGN DIRECT INVESTMENT: A PANEL GRAVITY MODEL APPROACH

This paper investigates the relationship between corruption and foreign direct investment (FDI) in the case of 15 transition countries by using a panel gravity model approach and suggests that corruption does not deter FDI.     

腐败对外国直接投资影响的实证分析

本文依据世界106个国家的截面数据．分析了腐败对外国直接投资（FDI）的影响。研究结果表明，腐败与FDI之间存在显著的负相关。但是，腐败对FDI的负面影响可以在一定程度上被诸如东道国经济开放和政治稳定等积极因素所抵消。     

东道国腐败对FDI及其来源的影响

腐败问题很早就受到政治学和经济学学者的重视,但在国际商务领域内,对这一问题的研究只有近十年的历史.东道国腐败不但会对流入该国的外商直接投资总量产生影响,而且会影响FDI的来源.运用国际公开数据,以FDI流入作为研究对象,实证检验以上理论假设,结果证明东道国腐败会对外商直接投资产生负面影响,如果FDI来源国存在海外反腐败法,东道国腐败就会使来自这些国家的FDI减少.     

Corruption and economic growth: New empirical evidence

The nexus between corruption and economic growth has been examined for a long time. Many empirical studies measured corruption by the reversed Transparency International's Perception of Corruption Index (CPI) and ignored that the CPI was not comparable over time. The CPI is comparable over time since the year 2012. We employ new data for 175 countries over the period 2012–2018 and re-examine the nexus between corruption and economic growth. The cumulative long-run effect of corruption on growth is that real per capita GDP decreased by around 17% when the reversed CPI increased by one standard deviation. The effect of corruption on economic growth is especially pronounced in autocracies and transmits to growth by decreasing FDI and increasing inflation.     

The Determinants of Foreign Direct Investment in the Business Services Industry

Abstract

This report aims to identify the determinant factors of FDI in the business services industry by examining 20 variables and their impacts on attracting foreign investment in 33 sample countries plus Hong Kong. The results of this study indicate that system-related factor conditions and demand conditions have a strong correlation to FDI. Among the variables under system-related factor conditions, four (bribery and corruption, transparency, intellectual property rights (IPR), and ease of doing business) greatly influence the amount of FDI in the business services industry. Among the variables under demand conditions, three (the cost of living index, office rent, and GDP) are key. At the same time, this paper concludes that the aforementioned factors influence not only the business services sector, but the manufacturing industry's FDI as well. Another main finding of this paper is that the FDI in the business services industry is more frequently found in more developed economies. For the market seeking and efficiency-seeking FDI, the quality of system-related factor conditions and the size of GDP are of particular importance for FDI in the business services industry.     

International migration,foreign direct investment,and development stage in developing economies

The existing empirical results on the relationship between FDI and migration are rather mixed. This study reevaluates, both theoretically and empirically, how inward FDI relates to emigration in developing countries. Our model illustrates that the relationship between inward FDI and emigration flows depends on the development stage of a developing country, that is, there is a positive association between inward FDI and emigration flows for relatively less‐developed countries but a negative association between these two variables for relatively developed countries. We confirm the empirical validity of our model prediction using the panel data of 21 OECD and 51 non‐OECD countries during the period from 2003 to 2012. Our results argue that as economic development proceeds in a developing country, the home effect of inward FDI associated with intensified labor demand would dominate the linkage effect that induces the brain drain problem through enhancing the socioeconomic ties with migrant networks.     

Corruption,growth, and growth volatility

While the existing studies focus on the corruption–growth relationship, this paper introduces a new focus involving corruption and growth volatility. The Ehrlich–Lui (1999) framework provides the theoretical background of the paper, which produces testable hypotheses regarding the corruption–growth and the corruption–growth volatility relationship. The cross-section dataset that is used in the empirical analysis contains 121 developed and developing countries. In terms of the relationship between the governance-related variables and growth rates, only corruption control and government effectiveness significantly and adversely affect the average growth rate. Regarding the relationship between growth volatility and governance-related variables, the results suggest that higher corruption control, expropriation risk control, government effectiveness, and government consumption decrease growth volatility.     

Trade Openness,Corruption and Factor Abundance: Evidence from a Dynamic Panel

Using the Heckscher–Ohlin–Samuelson–Vanek (HOSV) framework, this paper illustrates a relationship between corruption and the pattern of international trade that depends on the factor endowments of countries. The relationship between trade openness and corruption is empirically investigated by using a panel dataset on trade openness, corruption and capital–labor ratio, and applying estimation techniques developed for dynamic panels. The regression results provide strong support to the hypothesis that the effect of corruption on trade openness depends on relative factor abundance.     

腐败与经济增长的关系实证研究——基于多国面板数据的分析

本文利用多国面板数据实证研究了腐败与经济增长的关系,得出以下结论:一是对于发达国家,腐败不利于经济增长;二是对于发展中国家,一开始腐败对经济增长是有促进作用的,但腐败与经济增长之间是一种倒U型的关系,腐败对经济增长的促进作用只是暂时的;三是对于我国,改革开放的深入,市场体制的完善,政府管制的减少,腐败的负面影响已经超过了正面影响,目前处于倒U型的右半部分,即腐败不利于我国经济增长。最后,本文给出了治理我国腐败的对策建议。     

Does domestic financial development enhance the linkages between foreign direct investment and economic growth?

The study examines the relationship between foreign direct investment (FDI), financial development, and economic growth in a panel of 95 developed and developing countries from 1983 to 2006. The study moves away from the traditional cross-sectional analysis, and focuses on more direct evidence of the channels via which FDI might help or retard economic growth. Using generalized method of moment (GMM) panel data analysis, we find strong evidence of a positive relationship between FDI inflows into a country and its economic performance. We also find evidence that domestic financial system is a significant prerequisite for FDI to have a positive effect on economic growth. Policy implications are clear. Effort should be made to reform and improve the development of domestic financial system in order to benefit more from the presence of FDI.     

WHAT MAKES INTERNATIONAL CAPITAL FLOWS PROMOTE ECONOMIC GROWTH? AN INTERNATIONAL CROSS‐COUNTRY ANALYSIS

This paper re‐examines the relationship between international capital flows and economic growth within the context of various ‘conditional factors’ that possibly have the potential to influence such relationships. It achieves this by employing panel data for 80 countries that cover 1976–2007. International capital inflow is broken down into foreign direct investments (FDI) and foreign portfolio investments (FPI). We find interesting evidence that only FDI has a positive effect on growth and that FPI has an unfavorable, if not negative, effect on growth. The conditional variables of banking liberalization, high‐income level, twin crises, lower corruption, and human capital mitigate the positive impacts of FDI on growth. In contrast, the middle‐income level and good shareholder protection have a positive effect. As concerns FPI, the level of financial liberalization, being in a Latin American region, the wealth of countries, and market governance all influence the way that FPI affects growth, whereas the conditional variables of twin crises and human capital do not influence the effect of FPI on economic growth.     

The behaviour of Russian industrial enterprises under transformation

Regional economic growth in Russia's regions in 1995–2000 is analysed with particular attention paid to FDI and how it influenced growth during this period. FDI appears to have been essential before the 1998 crisis in helping the economy grow despite the initial chaos of the transition. Larger regional economies that have garnered most FDI and perhaps gone further with institutional reforms that can assist in capturing the full benefits of FDI are likely to lead economic growth in the future. All regions need to take advantage now of the favourable economic environment to assess and learn from prior FDI experience to foster future growth should the price of oil and the remaining advantage of a depreciated currency change. No evidence was found that region-wide corruption hindered economic growth in the 1990s.     

Autocracy,Democracy, and FDI Inflows to the Developing Countries

Abstract

This paper investigates the relationship between political regimes and Foreign Direct Investment (FDI) inflows to the developing countries for a sample of 134 countries over the 1983–2002 period. Using two categorical measures of regime type and three different measures of FDI, this study finds that, regardless of the measures of regime type, democracies are not significantly associated with either FDI in level or FDI as a ratio to GDP; democracy is positively related to a higher level of per capita FDI, but this result is not robust to alternative measures of political regime. Taken as a whole, there is no evidence of a systematic relationship between democracy and FDI inflows. This result suggests that being a democracy does not help attract higher levels of FDI.     

东道国腐败对跨国公司进入模式的影响研究

作为东道国投资环境中的重要组成部分,腐败不但会对FDI流入总量产生影响,还会对跨国公司的战略产生影响,而首先受到影响的就是跨国公司的进入模式战略。本研究以19个新兴市场国家的745家跨国公司子公司作为样本,运用MANOVA分析、判别分析、Logistic分析等研究方法得到以下结论:第一,东道国国家层面感知腐败、产业层面感知腐败会使跨国公司采用持股比例较低的合资(控股或非控股)进入模式;第二,东道国腐败程度对跨国公司进入模式战略的影响会受到跨国公司进入东道国战略动机的调节。     

中国服务业FDI与服务贸易进口的替代关系

分析了我国服务业FDI的利用现状和服务贸易进口现状。运用需求理论选择研究变量,采用1997—2011年的时间数据,通过进行协整检验、构建脉冲响应函数和进行方差分解分析,对服务业FDI与服务贸易进口的替代关系进行了分析。结果显示:服务业FDI与服务贸易进口之间存在长期均衡关系;长期内,服务业FDI与服务贸易进口之间存在替代关系,且服务业FDI对服务贸易进口的贡献率最大;货物贸易进口与服务贸易进口之间存在互补关系,且货物贸易进口对服务贸易进口的贡献率较小。     

政府规模、市场化与地区腐败

Using a panel data at the provincial level during the period of 1989–2004, this paper examines the effects of social and economic factors such as government scale, privatization, openness, and education on regional corruption. Applying a fixed-effect model and IV estimation, we find that government size positively affects the incidence rate of corruption, and the effect becomes larger with the increase in the size of the core department of the government. 1% increase in the core department of the government leads to a 0.68%–1% increase in the number of corruption cases. While the proportion of FDI is positively associated with the corruption of regional officials, the ratio of the import and export trade to GDP is negatively associated with corruption. The impact of privatization on corruption is ambiguous. We also identify the significant impacts of the size and structure of the government expenditure on corruption. __________ Translated from Jingji Yanjiu 经济研究 (Economic Research Journal), 2008, (11): 16–26     

The Relationship Between Growth,Total Investment and Inward FDI: Evidence from Time Series Data

This paper explores the causal relationship between growth, total investment and inward FDI in 47 countries. Using error‐correction model, the significance, direction and sign of long‐run and short‐run causal effects between GDP, capital stock and FDI stock are investigated. The miscellaneous results echo the divergent theoretical viewpoints and the mixed empirical results of previous works. However, the evidence found in this study suggests that there are differences in growth mechanism between developed and developing countries, between various developing regions, and between oil‐exporting and non‐oil‐exporting countries. The main policy implication is that capital investment is essential for growth while FDI’s effect is uncertain in developing countries. FDI as well as total investment enhances growth only under some conditions.