Does Foreign Direct Investment Decrease Corruption?

This paper assesses the effect of openness on corruption, using foreign direct investment (FDI) inflows as a measure of openness, after trade intensity is accounted for. We use a broad cross section of countries over the period 1970 to 1994 and address the issue of causality with a new set of instru...

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Autores principales:	Larraín B.,Felipe, Tavares,José
Lenguaje:	English
Publicado:	Instituto de Economía, Pontificia Universidad Católica de Chile 2004
Materias:	Foreign Direct Investment Corruption International Trade Instrumental Variables
Acceso en línea:	http://www.scielo.cl/scielo.php?script=sci_arttext&pid=S0717-68212004012300003
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spelling	oai:scielo:S0717-682120040123000032004-09-28Does Foreign Direct Investment Decrease Corruption?Larraín B.,FelipeTavares,José Foreign Direct Investment Corruption International Trade Instrumental Variables This paper assesses the effect of openness on corruption, using foreign direct investment (FDI) inflows as a measure of openness, after trade intensity is accounted for. We use a broad cross section of countries over the period 1970 to 1994 and address the issue of causality with a new set of instrumental variables relying on geographical and cultural distance between the FDI exporting and recipient countries. The economics literature has demonstrated that higher corruption levels discourage FDI. Here we study the reverse link, that is, how foreign direct investment impacts corruption. We find that FDI as a share of GDP is significantly associated with lower corruption levels, irrespective of import intensity levels. The quantitative impact of FDI on corruption appears to be of the same order of magnitude as that of per capita GDPinfo:eu-repo/semantics/openAccessInstituto de Economía, Pontificia Universidad Católica de ChileCuadernos de economía v.41 n.123 20042004-08-01text/htmlhttp://www.scielo.cl/scielo.php?script=sci_arttext&pid=S0717-68212004012300003en10.4067/S0717-68212004012300003
institution	Scielo Chile
collection	Scielo Chile
language	English
topic	Foreign Direct Investment Corruption International Trade Instrumental Variables
spellingShingle	Foreign Direct Investment Corruption International Trade Instrumental Variables Larraín B.,Felipe Tavares,José Does Foreign Direct Investment Decrease Corruption?
description	This paper assesses the effect of openness on corruption, using foreign direct investment (FDI) inflows as a measure of openness, after trade intensity is accounted for. We use a broad cross section of countries over the period 1970 to 1994 and address the issue of causality with a new set of instrumental variables relying on geographical and cultural distance between the FDI exporting and recipient countries. The economics literature has demonstrated that higher corruption levels discourage FDI. Here we study the reverse link, that is, how foreign direct investment impacts corruption. We find that FDI as a share of GDP is significantly associated with lower corruption levels, irrespective of import intensity levels. The quantitative impact of FDI on corruption appears to be of the same order of magnitude as that of per capita GDP
author	Larraín B.,Felipe Tavares,José
author_facet	Larraín B.,Felipe Tavares,José
author_sort	Larraín B.,Felipe
title	Does Foreign Direct Investment Decrease Corruption?
title_short	Does Foreign Direct Investment Decrease Corruption?
title_full	Does Foreign Direct Investment Decrease Corruption?
title_fullStr	Does Foreign Direct Investment Decrease Corruption?
title_full_unstemmed	Does Foreign Direct Investment Decrease Corruption?
title_sort	does foreign direct investment decrease corruption?
publisher	Instituto de Economía, Pontificia Universidad Católica de Chile
publishDate	2004
url	http://www.scielo.cl/scielo.php?script=sci_arttext&pid=S0717-68212004012300003
work_keys_str_mv	AT larrainbfelipe doesforeigndirectinvestmentdecreasecorruption AT tavaresjose doesforeigndirectinvestmentdecreasecorruption
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Does Foreign Direct Investment Decrease Corruption?

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