Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/19312
Authors: 
Busse, Matthias
Year of Publication: 
2003
Series/Report no.: 
HWWA Discussion Paper 220
Abstract: 
Many believe that multinational enterprises insensitively ignore political rights and civil liberties in the countries of their investments. Frequently, non-governmental organisations accuse multinationals of fostering repressive regimes in developing countries and consider foreign direct investment (FDI) as a tool of exploitation. This paper tries to examine empirically the complex relationship between democracy and FDI in a systematic way, using cross-sectional and panel data analysis. The results indicate that – on average – investments by multinationals are significantly higher in democratic countries, thereby refuting the hypothesis that political repression fosters FDI. Yet this positive link does not hold for the 1970s, when a considerable share of FDI flowed to countries with repressive regimes.
Subjects: 
FDI
Democracy
Political Rights
Civil Liberties
JEL: 
F21
F23
C31
C33
Document Type: 
Working Paper

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