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Political Risk, Institutions and Foreign Direct Investment

Carsten Hefeker and Matthias Busse

No 315, HWWA Discussion Papers from Hamburg Institute of International Economics (HWWA)

Abstract: The paper explores the linkages between political risk, institutions and foreign direct investment inflows. Using different econometric techniques for a data sample of 83 developing countries and the period 1984 to 2003, we identify those indicators that matter most for the activities of multinational corporations. Overall, 12 different indicators for political risk and institutions are employed in the empirical analysis. The results show that government stability, the absence of internal conflict and ethnic tensions, basic democratic rights and ensuring law and order are highly significant determinants of foreign investment inflows.

Keywords: Political Risk; Institutions; FDI; Multinational Corporations (search for similar items in EconPapers)
JEL-codes: C31 F21 F23 C33 (search for similar items in EconPapers)
Date: 2005
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https://www.econstor.eu/bitstream/10419/19287/1/315.pdf (application/pdf)

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Journal Article: Political risk, institutions and foreign direct investment (2007) Downloads
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