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Revisiting the relationship between governance and foreign direct investment

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  • Pierre-Guillaume Méon
  • Khalid Sekkat

Abstract

Using a sample of 96 countries over the nineties, this paper examines the extent to which different dimensions of governance affect FDI inflows. It considers six aspects of governance. The results of a least-squares estimation suggest a positive relationship between institutional quality and FDI. However, when the issue of the endogeneity of governance is tackled thanks to 2SLS regressions, the relationship appears much weaker.

Suggested Citation

  • Pierre-Guillaume Méon & Khalid Sekkat, 2007. "Revisiting the relationship between governance and foreign direct investment," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 50(1), pages 41-61.
    • Handle: RePEc:bxr:bxrceb:y:2007:v:50:i:1:p:41-61
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    3. Jean-Luc Demeulemeester & Olivier Debande, 2008. "Quality and Variety Competition in Higher Education," Working Papers 08-10, Association Française de Cliométrie (AFC).
    4. Benoît Mahy & François Rycx & Mélanie Volral, 2008. "L'influence de la dispersion salariale sur la performance des grandes entreprises belges," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(3), pages 27-40.
    5. Bernal, Oscar & Oosterlinck, Kim & Szafarz, Ariane, 2010. "Observing bailout expectations during a total eclipse of the sun," Journal of International Money and Finance, Elsevier, vol. 29(7), pages 1193-1205, November.
    6. Jean Luc De Meulemeester, 2007. "L'économie de l'éducation fait-elle des progrès? Une perspective d'histoire de la pensée économique," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 50(1), pages 89-111.
    7. Henri Capron & Michele Cincera, 2007. "EU pre-competitive and near-the-market S&T collaborations," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 50(1), pages 135-159.
    8. Mumtaz Hussain Shah & Anum Gul Afridi, 2015. "Significance of Good Governance for FDI Inflows in SAARC Countries," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 7(2), pages 31-52, October.
    9. Charles Plaigin, 2009. "Exploratory study on the presence of cultural and institutional growth spillovers," DULBEA Working Papers 09-03.RS, ULB -- Universite Libre de Bruxelles.
    10. Jérôme De Henau & Leila Maron & Danièle Meulders & Sile Padraigin O'Dorchai, 2007. "Travail et maternité en Europe: conditions de travail et politiques publiques," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 50(1), pages 63-88.
    11. Henri Capron, 2007. "Politique de cohésion et développement régional," DULBEA Working Papers 07-16.RS, ULB -- Universite Libre de Bruxelles.
    12. Strand, Jon, 2009. ""Revenue management"effects related to financial flows generated by climate policy," Policy Research Working Paper Series 5053, The World Bank.
    13. Ariane Szafarz, 2007. "Hiring people-like-yourself: a representation of discrimination on the job market," DULBEA Working Papers 07-21.RS, ULB -- Universite Libre de Bruxelles.
    14. Sile Padraigin O'Dorchai, 2008. "Pay inequality in 25 European countries," DULBEA Working Papers 0006, ULB -- Universite Libre de Bruxelles.
    15. Luisa Melo & Michael A. Quinn, 2015. "Oil. Foreign Direct Investment an d Corruption," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 9(1), pages 33-49.
    16. Pierre-Guillaume Méon & Ariane Szafarz, 2008. "Labor market discrimination as an agency cost," DULBEA Working Papers 08-19.RS, ULB -- Universite Libre de Bruxelles.
    17. Caroline Gerschlager, 2008. "Foolishness and identity: Amartya Sen and Adam Smith," DULBEA Working Papers 08-03.RS, ULB -- Universite Libre de Bruxelles.
    18. Kuloglu, Ayhan & Lobont, Oana-Ramona & Topcu, Mert, 2012. "A question of causality between political corruption, economic freedom and economic growth in Europe," MPRA Paper 40365, University Library of Munich, Germany.
    19. Pierre-Guillaume Méon & Khalid Sekkat, 2007. "Revisiting the relationship between governance and foreign direct investment," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 50(1), pages 41-61.
    20. Philipp Harms & Pierre-Guillaume Méon, 2013. "The Composition of FDI in the MENA Region and Other Countries: Econometric Investigation and Implications for MENA Countries," Working Papers 793, Economic Research Forum, revised Nov 2013.
    21. Abdeslam Marfouk, 2008. "The African brain drain: scope and determinants," DULBEA Working Papers 08-07.RS, ULB -- Universite Libre de Bruxelles.

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    More about this item

    Keywords

    Institutions; governance; foreign direct investment;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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