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Political environment and foreign direct investment: Evidence from OECD countries

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  • Wisniewski, Tomasz P.
  • Pathan, Saima K.

Abstract

This paper examines the role that political factors play in the investment location decisions of multinational enterprises. It has been found that foreign direct investors shy away from countries with excessive government spending, especially when this spending is directed towards the military. They also seem to have a slight preference for leftist executives and be negatively predisposed toward situations in which the ruling party has held power for prolonged periods of time. Ceteris paribus, more FDI flows to countries that have presidential systems, established political parties and where the party of the executive controls all houses with lawmaking powers.

Suggested Citation

  • Wisniewski, Tomasz P. & Pathan, Saima K., 2014. "Political environment and foreign direct investment: Evidence from OECD countries," European Journal of Political Economy, Elsevier, vol. 36(C), pages 13-23.
    • Handle: RePEc:eee:poleco:v:36:y:2014:i:c:p:13-23
    DOI: 10.1016/j.ejpoleco.2014.07.004
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    More about this item

    Keywords

    Foreign direct investment; Political economy; MNEs; OECD;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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