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Do Countries with Similar Levels of Corruption Compete to Attract Foreign Investment? Evidence Using World Panel Data

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  • Luisa Alamá-Sabater

    (Department of Economics and Local Development Institute (IIDL), Universitat Jaume I, Campus del Riu Sec, 12071 Castelló de la Plana, Spain)

  • Teresa Fernández-Núñez

    (Department of Economics, Faculty of Economics and Business Administration, University of Extremadura, 06071 Badajoz, Spain)

  • Miguel Ángel Márquez

    (Department of Economics, Faculty of Economics and Business Administration, University of Extremadura, 06071 Badajoz, Spain)

  • Javier Salinas-Jimenez

    (Departamento de Economía y Hacienda Pública, Universidad Autónoma de Madrid, 28049 Madrid, Spain)

Abstract

This paper examines whether foreign direct investment in one country helps to increase foreign investment in other countries with a similar degree of corruption. Our estimates are based on an unbalanced annual panel of 164 countries over the 2005–2015 period. Using spatial econometric techniques, our main findings reveal that foreign investment in one recipient country is complementary to that in countries with similar levels of corruption. Furthermore, our results point to the existence of different circuits of foreign direct capital among countries that are determined by corruption similarity. These results suggest important policy implications for countries aiming to attract foreign investment.

Suggested Citation

  • Luisa Alamá-Sabater & Teresa Fernández-Núñez & Miguel Ángel Márquez & Javier Salinas-Jimenez, 2020. "Do Countries with Similar Levels of Corruption Compete to Attract Foreign Investment? Evidence Using World Panel Data," Sustainability, MDPI, vol. 12(15), pages 1-15, July.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:15:p:6194-:d:393011
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    2. Mahyudin Ahmad & Stephen G. Hall, 2023. "The growth effects of economic and political institutions: new evidence from spatial econometrics analysis using historical-based institutional matrix," Economic Change and Restructuring, Springer, vol. 56(2), pages 749-780, April.

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