Political regime and FDI from advanced to emerging countries |
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Authors: | Selen S Guerin Stefano Manzocchi |
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Institution: | (1) Centre for European Policy Studies, Brussels, Belgium;(2) Department of Economics, LUISS University, Viale Romania 32, 00197 Rome, Italy |
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Abstract: | We investigate the effect of the political regime on bilateral FDI flows from advanced to emerging countries in the period
1992–2004. We control for country size, per capita income and privatization proceeds in the host country, and use a random-effect
Tobit model to exploit information from zero entries. Our results suggest that democracy does have a positive effect on the
amount and probability of FDI flows from developed to emerging countries. Moreover, we find that the effect of democracy on
FDI also works through the total factor productivity channel, not only the political risk one as suggested in the literature.
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Keywords: | Foreign direct investment Political regime Democracy Tobit models |
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