Does a nonlinear specification methodology better capture the link between host country corruption levels and inward foreign direct investments? A study of 92 countries

Chi-Hui Wang, Prasad Padmanabhan and Chia-Hsing Huang

Global Business and Economics Review, 2020, vol. 23, issue 1, 50-78

Abstract: This paper investigates the link between inward foreign direct investment flows and host country corruption levels using annual data for developed, developing and transitional countries, over the 2002-2015 period. We find that the nonlinear specification provides a better characterisation of the relationship between corruption and inward FDI flows. Furthermore, we find that this relationship is a function of the development status of the host country. Finally, the marginal impact of corruption levels on FDI seems to be statistically significant at a higher level when a nonlinear (as opposed to a linear) specification is used.

Keywords: foreign direct investment; corruptions perceptions index; nonlinear modelling. (search for similar items in EconPapers)
Date: 2020
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