Does Contract Risk Impede Foreign Direct Investment?

Peter Egger and Hannes Winner

Swiss Journal of Economics and Statistics (SJES), 2003, vol. 139, issue II, 155-172

Abstract: This paper analyzes the impact of contract-related risk factors on inward foreign direct investment. We presume that risk related determinants enter directly the cost function of multinationals. For a sample of 50 developed and less developed countries and the time period 1985-1997 we find a clear negative relationship between contract risk and FDI. Further, a simulation analysis reveals that the observed change in contract risk has equalized the international distribution of inward foreign direct investment.

Keywords: Contract risk; Corruption; Foreign direct investment; Panel econometrics (search for similar items in EconPapers)
JEL-codes: C23 F23 R38 (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:ses:arsjes:2003-ii-2

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