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Greenfield FDI, cross-border M&As and government size

Ayesha Ashraf, Dierk Herzer and Peter Nunnenkamp

No 2068, Kiel Working Papers from Kiel Institute for the World Economy (IfW)

Abstract: This study examines the effects of greenfield FDI and cross-border mergers and acquisitions (M&As) on government size in host countries of FDI. Using panel data for up to 130 countries for the period from 2003-2011, the study specifically tests the compensation hypothesis, suggesting that by increasing economic insecurity, economic openness leads to larger government size. It is found that greenfield FDI increases labour market volatility and thereby economic insecurity while M&As are not significantly associated with labour market volatility. The main results of this study are that greenfield FDI has a robust positive effect on government size, while M&As have no statistically significant effect on government size in the total sample of developed and developing countries, as well as in the sub-samples of developed and developing countries.

Keywords: greenfield FDI; mergers & acquisitions; economic insecurity; government size (search for similar items in EconPapers)
JEL-codes: F21 F23 E62 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int and nep-mac
Date: 2016
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Journal Article: Greenfield FDI, cross-border M&As, and government size (2017) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:2068

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