Deception, corruption and 'schizophrenia' in an incomplete-information model of foreign direct investment

David E Hojman ()
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David E Hojman: University of Liverpool, Postal: Department of Economics and Accounting, The School of Management,University of Liverpool, Chatham Street, Liverpool, L69 7ZH, Great Britain

No 2001_01, Working Papers from University of Liverpool, Department of Economics

Abstract: Not all potential investors are equally discouraged by host country corruption. Some investors may actually benefit from it, especially if deception as to the true value of their investments is possible. A model is presented and tested with data for Latin America's top seven hosts and top eight sources of foreign direct investment. In general, FDI is not affected by host corruption, but sometimes it responds (mostly negatively) to the gap between the corruption indices of source and host and, to a lesser extent, to the gap in degrees of economic freedom. There is substantial heterogeneity among source countries.

Keywords: Foreign direct investment (FDI); Corruption; Incomplete information; Country heterogeneity; Latin America (search for similar items in EconPapers)
JEL-codes: D82 F21 F23 L33 L43 L5 N46 P16 (search for similar items in EconPapers)
Date: 2001
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:liv:livedp:2001_01

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