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Proceedings of the German Development Economics Conference, 2011 (Berlin) >
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http://hdl.handle.net/10419/48286
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| Title: | | Democratic Accountability and the Relative Obstacles to Foreign Investment  |
| Authors: | | McCann, Fergal Dorsch, Michael McGuirk, Eoin |
| Issue Date: | | 2011 |
| Series/Report no.: | | Proceedings of the German Development Economics Conference, Berlin 2011 56 |
| Abstract: | | This paper considers the relationship between democratic accountability in de- veloping countries and the policies they use to attract foreign direct investment (FDI). We isolate two policy areas that governments of developing countries use to attract FDI: the tax burden on firms and the regulatory standards within which they operate. Countries that maintain high business taxes can only attract FDI by offering a less regulated business environment, which may have associated po- litical costs. The extent to which democratic accountability constrains leaders in their tax/regulatory policy choices is our main line of analysis. The novelty of the paper is that it endogenously determines policy choices within a political economy framework that recognizes the trade-offs between attracting FDI and maintaining political control. Examination of firm-level survey data from foreign firms operating in eastern Europe and central Asian economies confirms our model's main conclusion: regulation is seen to be a relatively larger obstacle to doing business in countries with greater democratic accountability. |
| Document Type: | | Conference Paper |
| Appears in Collections: | | Proceedings of the German Development Economics Conference, 2011 (Berlin)
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