Governance and the relationship between corruption and FDI in Africa: a threshold regression analysis

Bianca Lakha, Adeola Oyenubi, David Fadiran and Nimisha Naik

International Review of Applied Economics, 2024, vol. 38, issue 6, 613-632

Abstract: Research on the institutional environment, corruption, and FDI highlights an important facilitating relationship between these factors. The effect of corruption on FDI vis-à-vis the grabbing hand vs. the helping hand hypotheses has been previously examined with suggestions that both hypotheses can co-exist under the assumption that the FDI-corruption relationship depends on the level of institutions. This study revisits this relationship for 34 African countries over the 2005 to 2019 period using the dynamic panel threshold model, which allows for an endogenous threshold variable. Previous studies that have examined this relationship using a threshold regression approach are either not based exclusively on African countries (where the implication of this relationship is more salient) or use a threshold regression that assumes exogeneity of the threshold variable. This study examines the facilitating nature of governance measures – political stability, government effectiveness, rule of law and regulatory quality – on the corruption-FDI relationship. The results indicate significant threshold effects and shows that while the grabbing hand hypothesis is consistent with the data irrespective of the institutional proxy used, the helping hand hypothesis is sensitive to the choice of governance. These results agree with the strand of literature that supports a weak helping hand hypothesis.

Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/02692171.2024.2382112 (text/html)
Access to full text is restricted to subscribers.

Related works:
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:taf:irapec:v:38:y:2024:i:6:p:613-632

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/CIRA20

DOI: 10.1080/02692171.2024.2382112

Access Statistics for this article

International Review of Applied Economics is currently edited by Professor Malcolm Sawyer

More articles in International Review of Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().