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The Impact of Crime and Other Economic Forces on Mexico's Foreign Direct Investment Inflows

Rene Cabral (), Mollick André V. and Saucedo Eduardo

No 2018-24, Working Papers from Banco de México

Abstract: This paper examines the effect of different crimes on Foreign Direct Investment (FDI) inflows into the 32 Mexican states. Using a state-quarter panel data for the period 2005 to 2015, we estimate alternative models of FDI, with fixed effects throughout a flexible lag-lengths methodology and System Generalized Method of Moments (SGMM) models in order to identify the determinants of FDI inflows into the country. The dependent variable in our model is the annual inflow of FDI and the independent variables are state level indicators (real wages and electricity consumption), and macroeconomic forces (the real exchange rate and interest rate). We find that homicides and thefts have negative statistically significant effects on FDI, while other crimes show no effects. Partitions of the sample suggest higher negative effects in the most violent states.

Keywords: Crime; Foreign Direct Investment; Mexico; Panel Data (search for similar items in EconPapers)
JEL-codes: C33 F21 F52 P45 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int
Date: 2018-12
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