Asymmetric Effects of Corruption on FDI: Evidence from Swedish Multinational Firms

Katariina Nilsson Hakkala, Pehr-Johan Norbäck and Helena Svaleryd

No 641, Working Paper Series from Research Institute of Industrial Economics

Abstract: We examine the effect of corruption on foreign direct investments. Our model shows that corruption may have different effects on investments aimed at selling to a local market, in comparison to investments aimed at selling from the corrupt market. Using Swedish firm-level data, we find that affiliate local sales decrease with corruption, while affiliate exports increase. Finally, corruption has a negative effect on the probability that a foreign firm will invest in a country. These results are consistent with theory when bribing reduces production costs and local firms have an advantage in bribing vis à vis foreign firms.

Keywords: FDI; Corruption; Multinational Firm (search for similar items in EconPapers)
JEL-codes: D73 F21 F23 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2005-05-12, Revised 2007-08-20
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Published in The Review of Economics & Statistics, 2008, pages 627-642.

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Journal Article: Asymmetric Effects of Corruption on FDI: Evidence from Swedish Multinational Firms (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:0641

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