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Title:Political regime, private investment, and foreign direct investment in developing countries PDF Logo
Authors:Udomkerdmongkol, Manop
Morrissey, Oliver
Issue Date:2008
Series/Report no.:Research paper / UNU-WIDER 2008.109
Abstract:This paper uses annual aggregate data for 36 low or middle income countries covering the period 1995-2001 to investigate the effect of FDI on private investment. It also explores if the relationship between FDI and private investment is influenced by the nature of the political regime, using four governance measures (voice and accountability, regulatory quality, political stability, and control of corruption) to distinguish between market-friendly (high or good governance values) and market-unfriendly (low governance) regimes. The results, which hold for all of the governance measures, show that private investment is more important than FDI in terms of the contribution to total investment, and that FDI inflows and private investment are higher in countries with good governance. Interestingly, the findings demonstrate that FDI tends to displace domestic private investment, and this crowding out effect is greater in countries with good governance.
Subjects:FDI
investment sources
finance
JEL:E22
O16
ISBN:978-92-9230-167-5
Document Type:Working Paper
Appears in Collections:WIDER Research Papers, United Nations University (UNU)

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