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Impact of Pension Privatization on Foreign Direct Investment

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  • Reece, Christopher
  • Sam, Abdoul G.

Abstract

We explore the causal effect of market-oriented pension reform on net foreign direct investment (FDI) inflows in Latin America and among the transitional economies of Eastern Europe and Central Asia, both of which have experienced waves of pension privatization and FDI over the last two decades. With our balanced panel of 42 countries over the 1991–2006 period, we implement fixed effects models, controlling for the decision to enact full or partial privatization of the public pension system and several other covariates whose choice is informed by the rich empirical literature on FDI. Our econometric results indicate that pension privatization triggers a significant increase in net FDI inflows and that the effect does not wane over time. We estimate that full privatization increases FDI as a percentage of GDP by about 57%, ceteris paribus.

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  • Reece, Christopher & Sam, Abdoul G., 2012. "Impact of Pension Privatization on Foreign Direct Investment," World Development, Elsevier, vol. 40(2), pages 291-302.
    • Handle: RePEc:eee:wdevel:v:40:y:2012:i:2:p:291-302
    DOI: 10.1016/j.worlddev.2011.06.003
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    2. Olawumi Dele Awolusi & Ezekiel Jide Fayomi & GANIYU Idris Olayiwola, 2017. "International Trade, Foreign Direct Investment (FDI) and International Technology Transfer: A Comparative Study of Asian and African Economies," Journal of Economics and Behavioral Studies, AMH International, vol. 8(6), pages 127-145.
    3. Mao, Haiou & Görg, Holger & Fang, Guopei, 2023. "Time to say goodbye? The impact of environmental regulation on foreign divestment," Kiel Working Papers 2255, Kiel Institute for the World Economy (IfW Kiel).
    4. Haiou Mao & Holger Görg & Guopei Fang, 2024. "Time to say goodbye? The impact of environmental regulation on foreign divestment," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 57(2), pages 502-527, May.
    5. Iamsiraroj, Sasi & Doucouliagos, Hristos, 2015. "Does growth attract FDI?," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 9, pages 1-35.
    6. Liu, Yi & Li, Xue & Lahiri, Sajal, 2016. "Determinants of privatization in China: The role of the presence of foreign firms," China Economic Review, Elsevier, vol. 41(C), pages 196-221.
    7. Mao, Haiou & Görg, Holger & Fang, Guopei, 2023. "Time to Say Goodbye? The Impact of Environmental Regulation on Foreign Divestment," IZA Discussion Papers 16406, Institute of Labor Economics (IZA).
    8. Mao, Haiou & Görg, Holger & Fang, Guopei, 2023. "Time to say goodbye? The impact of environmental regulation on foreign divestment," KCG Working Papers 27, Kiel Centre for Globalization (KCG).
    9. Muhammad Imran & Abdul Rashid, 2023. "The Empirical Determinants of Foreign Direct Investment Episodes," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 15(3), pages 409-435, September.

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