FDI Waves, Waves of Neglect of Political Risk

Pierre-Guillaume Méon and Khalid Sekkat

ULB Institutional Repository from ULB -- Universite Libre de Bruxelles

Abstract: Studies of the impact of local political risk on foreign direct investment inflows overlook that worldwide FDI comes in waves. Using a simple model we show that the impact of political risk on FDI inflows is likely to be weaker, the larger the worldwide amount of FDI, which may question standard estimates and their policy implications. Using a large sample of developing and developed economies, we estimate the sensitivity of the distribution of FDI inflows across countries, to the local political risk. We find that it is a decreasing function of the worldwide amount of FDI. This finding has been upheld after many robustness checks.

Keywords: Foreign direct investment; institutions; political risk; governance. (search for similar items in EconPapers)
Date: 2012-11
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Citations: View citations in EconPapers (24)

Published in: World development (2012) v.40 n° 11,p.2194-2205

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Related works:
Journal Article: FDI Waves, Waves of Neglect of Political Risk (2012)
Working Paper: FDI waves, waves of neglect of political risk (2010)
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