Does FDI Affect Social Protests Level?: Panel Granger Causality Test

Deniz Güverci̇n

Fiscaoeconomia, 2017, issue 3

Abstract: FDI as an the extension of foreign economic units has significant economic and political impacts on host country. The literature focusing on the political determinants of the FDI inflows, does not put emphasis on whether FDI can affect the level of political rights, attendace level to the social protests in the host country. This study sheds new insight by adding the relevant literature the issue of the impact of FDI on attendance level to social protests in the host countries by bringing the cross country evidence. I refer in the paper some channels through which FDI can affect the attendance level to social demonstrations. The main channel, along with others, I emphasize that if the growth-enhancing FDI keeps flowing and creating economic growth , voters become more motivated to vote for the incumbent party. To this end, incumbent government to draw economic benefits from FDI inflows ,particularly right before elections, would release the restrictions on the political rights, and ease the harsh repressions and crackdowns to diminish the level of political risks and uncertainty that would lower the difficulty of collective action which would prompt the attendance level to social protests. Dumitrescu & Hurlin Panel Granger test is implemented to test FDI-number of social protesters causality using the relevant data of six European countries where the FDI flows to benefit primarily from stock of knowledge, human capital stock. Test results indicate that there is a bi-directional causality running from FDI to number of social protesters that implies that FDI has an impact on attandance level to protests in the host country.

Keywords: FDI; Social Protest; Collective Action Problem; Dumitrescu & Hurlin Panel Granger test; European Protest and Coercion Data Set (search for similar items in EconPapers)
JEL-codes: D72 D74 F23 F66 (search for similar items in EconPapers)
Date: 2017
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