The Impact of Transparency on Foreign Direct Investment

Zdenek Drabek and Warren Payne (wpayno@usitc.gov)
Additional contact information
Warren Payne: US Trade Commission, Postal: US Trade Commission Washington, D.C.

Journal of Economic Integration, 2002, vol. 17, 777-810

Abstract:

Non-transparency is a term given in this paper to a set of government policies that increase the risk and uncertainty faced by economic actors (foreign investors). The higher in risk and uncertainty stem from the presence of bribery and corruption, unstable economic policies, weak and poorly enforced property rights, and inefficient government institutions. Our empirical analysis shows that the degree of non-transparency is an important factor in a country's attractiveness to foreign investors. High levels of non-transparency can greatly retard the amount of foreign investment that a country might otherwise expect. The simulation exercise presented in the statistical part of this paper reveals that on average a country could expect 40 percent increase in FDI from a one point increase in their transparency ranking. Pari passu, non-transparent policies translate into lower levels of FDI and hence lower levels of welfare and efficiency in the host country's economy. A nation that takes steps to increase the degree of transparency in its policies and institutions could expect significant increases in the level of foreign investment into their country. This increased investment translates into more resources, which in turn increase social welfare and economic efficiency.

Keywords: Foreign Direct Investment; Transparency; Corruption; FDI Modeling (search for similar items in EconPapers)
JEL-codes: F02 F13 F21 F23 M14 (search for similar items in EconPapers)
Date: 2002
References: Add references at CitEc
Citations: View citations in EconPapers (51)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Working Paper: The Impact of Transparency on Foreign Direct Investment (1999)
Working Paper: The Impact of Transparency on Foreign Direct Investment (1999)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:0220

Access Statistics for this article

Journal of Economic Integration is currently edited by Seongeun Kim

More articles in Journal of Economic Integration from Center for Economic Integration, Sejong University Contact information at EDIRC.
Bibliographic data for series maintained by Yunhoe Kim (jei@sejong.ac.kr).