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Are Some Dictators More Attractive to Foreign Investors?

Abel François, Sophie Panel and Laurent Weill ()
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Sophie Panel: IRSEM

Working Papers of LaRGE Research Center from Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg

Abstract: Since political uncertainty is greater in dictatorship than in democracy, we test the hypothesis that foreign investors scrutinize public information on dictator to assess this risk. In particular, we assume they use five suitable dictators’ characteristics: age, political experience, education level, education in economics, and prior experience in business. We perform fixed effects estimations to explain FDI inflows on an unbalanced panel of 100 dictatorial countries from 1973 to 2008. We find that educated dictators are more attractive to foreign investors. We obtain strong evidence that greater educational attainment of the leader favors FDI. We also find evidence that education in economics of the leader enhances FDI. By contrast, age, political experience, and prior experience in business have no relationship with FDI. Our results are robust to several tests and checks, including the comparison with democracies.

Keywords: foreign direct investment; dictatorship; leader characteristics; political risk. Classification-JEL F21; F23. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int and nep-pol
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:lar:wpaper:2018-05

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