FDI waves, waves of neglect of political risk

Pierre-Guillaume Méon and Khalid Sekkat

No 10-004.RS, Working Papers CEB from ULB -- Universite Libre de Bruxelles

Abstract: Many studies have underlined the detrimental impact of local political risk on foreign direct investment inflows. In this paper, we argue that that relationship depends on the global volume of FDI. After providing a simple model and theoretical arguments suggesting that the relationship should be weaker when there is more FDI worldwide, we observe, in a large sample of countries, that the sensitivity of the distribution of FDI inflows to local political risk is indeed a decreasing function of the world FDI to GDP ratio in a given year. This finding survives a battery of robustness checks.

Keywords: Foreign direct investment; institutions; political risk; governance (search for similar items in EconPapers)
JEL-codes: C33 F21 F41 O17 (search for similar items in EconPapers)
Pages: 35 p.
Date: 2010
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Citations: View citations in EconPapers (2)

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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 (2012)
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