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Does corruption matter for sources of foreign direct investment?

Author

Listed:
  • Adiya Belgibayeva

    (Birkbeck, University of London)

  • Alexander Plekhanov

    (European Bank for Reconstruction and Development)

Abstract

The paper provides a cross-country empirical analysis of the impact of corruption on foreign direct investment flows. The gravity model augmented with joint effects of corruption in the origin and destination countries determines differentiated patterns of investment flows between countries with various levels of control of corruption. The estimates point towards greater investment flows between countries with good control of corruption. Moreover, if control of corruption in the destination country improves, investment flows from cleaner countries rise more strongly than those from countries with a higher incidence of corruption. The resulting shift towards a greater share of investment from low-corruption countries may further reinforce the strengthening of economic and political institutions that keep corruption in check.

Suggested Citation

  • Adiya Belgibayeva & Alexander Plekhanov, 2019. "Does corruption matter for sources of foreign direct investment?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 155(3), pages 487-510, August.
    • Handle: RePEc:spr:weltar:v:155:y:2019:i:3:d:10.1007_s10290-019-00354-1
    DOI: 10.1007/s10290-019-00354-1
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    More about this item

    Keywords

    Corruption; Foreign direct investment; Gravity model;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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