THE QUALITY OF INSTITUTIONS AND FOREIGN DIRECT INVESTMENT

CHRISTIAN DAUDE; ERNESTO STEIN

doi:10.1111/j.1468-0343.2007.00318.x

journal article Sep 10, 2007

THE QUALITY OF INSTITUTIONS AND FOREIGN DIRECT INVESTMENT

CHRISTIAN DAUDE ERNESTO STEIN

Economics & Politics Vol. 19 No. 3 pp. 317-344 · Wiley

View at Publisher Save 10.1111/j.1468-0343.2007.00318.x

Abstract

Using bilateral foreign direct investment (FDI) stocks around the world, we explore the importance of a wide range of institutional variables as determinants of the location of FDI. While we find that better institutions have overall a positive and economically significant effect on FDI, some institutional aspects matter more than others do. Especially, the unpredictability of laws, regulations and policies, excessive regulatory burden, government instability and lack of commitment play a major role in deterring FDI. For example, the effect of a one standard deviation improvement in the regulatory quality of the host country increases FDI by a factor of around 2. These results are robust to different specifications, estimation methods, and institutional variables. We also present evidence on the significance of institutions as a determinant of FDI over time.

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Details

Published: Sep 10, 2007
Vol/Issue: 19(3)
Pages: 317-344
License: View

Authors

Cite This Article

CHRISTIAN DAUDE, ERNESTO STEIN (2007). THE QUALITY OF INSTITUTIONS AND FOREIGN DIRECT INVESTMENT. Economics & Politics, 19(3), 317-344. https://doi.org/10.1111/j.1468-0343.2007.00318.x

THE QUALITY OF INSTITUTIONS AND FOREIGN DIRECT INVESTMENT

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