Corruption and FDI in Brazil: Contesting the “Sand” or “Grease” Hypotheses

Vanessa da Silva Mariotto Onody, Ana Catarina Gandra de Carvalho, Eduardo Polloni-Silva, Guilherme Augusto Roiz, Enzo Barberio Mariano, Daisy Aparecida Nascimento Rebelatto and Herick Fernando Moralles
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Vanessa da Silva Mariotto Onody: Department of Production Engineering (DEP), Federal University of São Carlos (UFSCar), São Carlos 13565-905, SP, Brazil
Ana Catarina Gandra de Carvalho: Department of Production Engineering (DEP), Federal University of São Carlos (UFSCar), São Carlos 13565-905, SP, Brazil
Eduardo Polloni-Silva: Department of Production Engineering (DEP), Federal University of São Carlos (UFSCar), São Carlos 13565-905, SP, Brazil
Guilherme Augusto Roiz: Department of Production Engineering, University of São Paulo (USP), São Carlos 05508-270l, SP, Brazil
Enzo Barberio Mariano: Department of Production Engineering, School of Engineering of Bauru, Campus Bauru, São Paulo State University (UNESP), Bauru 14800-903, SP, Brazil
Daisy Aparecida Nascimento Rebelatto: Department of Production Engineering, University of São Paulo (USP), São Carlos 05508-270l, SP, Brazil
Herick Fernando Moralles: Department of Production Engineering (DEP), Federal University of São Carlos (UFSCar), São Carlos 13565-905, SP, Brazil

Sustainability, 2022, vol. 14, issue 10, 1-18

Abstract: Foreign Direct Investment (FDI) is seen as a significant driver of economic growth and a potential ally in the struggle against poverty and inequality, making emerging countries focus on attracting this type of investment. Thus, understanding factors that impact the concentration of regional FDI is essential to verifying which characteristics encourage or deter foreign investment. Likewise, the literature has explored institutional factors such as corruption as determining factors for the concentration of FDI. Within this framework, this study aims to empirically examine the sensitivity of multinational enterprises (MNEs) to corruption. Few studies have been carried out on this subject, mainly in Latin American economies. We employ a unique Brazilian municipality-level FDI database to investigate whether corruption hinders (i.e., corruption acting as “sand”) or promotes the concentration of foreign investment (i.e., corruption acting like “grease”). Additionally, we believe that analyzing different economic sectors is essential to deepening the knowledge about the impacts of corruption on FDI. Our results show that corruption acts as “grease” for both overall FDI and at the level of individual sectors. Finally, when taking a non-linear approach, our findings show that corruption acts as grease for FDI only in regions with intermediate (medium–low) levels of corruption.

Keywords: corruption; Foreign Direct Investment (FDI); Brazil; sand and grease (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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